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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of income tax expense (benefit) applicable to pretax earnings for the years ended December 31 were as follows:
(In millions)ForeignU.S.Total
2022:
Current$913 $268 $1,181 
Deferred200 (978)(778)
Total income tax expense$1,113 $(710)$403 
2021:
Current$884 $211 $1,095 
Deferred251 (349)(98)
Total income tax expense$1,135 $(138)$997 
2020:
Current$822 $(28)$794 
Deferred(28)(1,385)(1,413)
Total income tax expense$794 $(1,413)$(619)

The Japan income tax rate for the fiscal years 2022, 2021 and 2020 was 28.0%.

Aflac Japan holds certain U.S. dollar-denominated assets in a Delaware Statutory Trust (DST). These assets are mostly comprised of various U.S. dollar-denominated commercial mortgage loans. The functional currency of the DST for U.S. tax purposes was historically the Japanese yen. In 2022, the Company requested a change in tax accounting method through the Internal Revenue Service's automatic consent procedures to change its functional currency on the DST for U.S. tax purposes to the U.S. dollar. As a result, foreign currency translation gains or losses on assets held in the DST will no longer be recognized for U.S. tax purposes. The Company historically recorded a deferred tax liability for foreign currency translation gains on the DST assets, which was released in the third quarter of 2022 as a result of the functional currency change and subsequently adjusted for foreign currency impacts in the fourth quarter of 2022. This change in functional currency resulted in the Company recognizing an income tax benefit of $452 million ($0.71 per basic and diluted share, respectively) in 2022.

In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into U.S. law. Effective January 1, 2023, the law imposes a 15% corporate alternative minimum tax rate and a 1% excise tax on the Company’s repurchases of its common stock. The Company does not anticipate any impacts from the new corporate minimum tax rate since its current tax rate is above the 15% minimum rate. Further, the Company expects the charges associated with the excise tax to be recognized in equity consistent with other costs related to treasury stock.

In September 2020, the U.S. Treasury and Internal Revenue Service issued Final and Proposed Regulations which address, among other items, the allocation of insurance expenses in the calculation of the foreign tax credit limitation. These regulations clarify how insurance related expenses are allocated and apportioned for this purpose. The Company had previously established valuation allowances on deferred foreign tax credits due to the uncertainty that previously existed. Under the guidance of these regulations, the Company recognized a one-time income tax benefit of $1.4 billion due to the release of these valuation allowances which were predominantly established on the Company’s deferred foreign tax credit benefits. The Company has determined that this will also reduce its effective tax rate in future periods, subject to any future changes in U.S. tax policy.

In March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. The Company was required to recognize the effect on the consolidated financial statements in the period the law was enacted, which was the period ended March 31, 2020. For the year ended December 31, 2020, the CARES Act did not have a material impact on the Company’s consolidated financial statements. Income tax expense in the accompanying statements of earnings varies from the amount computed by applying the expected U.S. tax rate of 21% in 2022, 2021 and 2020 to pretax earnings.
The principal reasons for the differences and the related tax effects for the years ended December 31 were as follows:
(In millions)202220212020
Income taxes based on U.S. statutory rates$967 $1,118 $873 
Valuation allowance release0 0 (1,411)
DST functional currency change(452)0 0 
Other, net(112)(121)(81)
Income tax expense$403 $997 $(619)

Total income tax expense for the years ended December 31 was allocated as follows:
(In millions)202220212020
Statements of earnings$403 $997 $(619)
Other comprehensive income (loss):
Unrealized foreign currency translation gains (losses) during
  period		547 15 (3)
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity
  securities during period		(2,752)(194)223 
Reclassification adjustment for (gains) losses
  on fixed maturity securities included in net earnings		0 (7)33 
Unrealized gains (losses) on derivatives during period1 1 0 
Pension liability adjustment during period35 30 (2)
Total income tax expense (benefit) related to items of
  other comprehensive income (loss)		(2,169)(155)251 
Total income taxes$(1,766)$842 $(368)
The income tax effects of the temporary differences that gave rise to deferred income tax assets and liabilities as of December 31 were as follows:
(In millions)20222021
Deferred income tax liabilities:
Deferred policy acquisition costs$2,803 $3,262 
Unrealized gains and other basis differences on investments0 5,313 
Foreign currency gain on Aflac Japan147 0 
Premiums receivable59 66 
Policy benefit reserves3,173 3,578 
Total deferred income tax liabilities6,182 12,219 
Deferred income tax assets:
Unfunded retirement benefits7 7 
Other accrued expenses27 38 
Policy and contract claims722 794 
Foreign currency loss on Aflac Japan0 91 
Deferred compensation65 104 
Depreciation248 230 
Anticipatory foreign tax credit3,069 5,883 
Deferred foreign tax credit822 701 
Other basis differences in investments101 0 
Other147 163 
Total deferred income tax assets5,208 8,011 
Net deferred income tax liability974 4,208 
Current income tax (asset) liability322 131 
Total income tax liability$1,296 $4,339 

The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. The Company has determined no valuation allowance against its anticipatory foreign tax credits is necessary. The anticipatory foreign tax credit represents the foreign tax credit the Company will generate from the reversal of Japan deferred tax liabilities in the future. The release of the valuation allowance on the anticipatory foreign tax credit is due to the regulations addressing the allocation of insurance expenses in the calculation of the foreign tax credit released September 29, 2020. The Company has also determined no valuation allowance against its deferred foreign tax credits is necessary. Deferred foreign tax credits are foreign tax credits generated in the current tax year by the Japanese life company, but are unable to be utilized until 2022 due to Japan's current tax year not closing until March 31, 2022. The release of the valuation allowance on the deferred foreign tax credit is also due to the foreign tax credit regulations released September 29, 2020. Based upon a review of the Company's anticipated future taxable income, and including all other available evidence, both positive and negative, the Company's management has concluded that, notwithstanding the items noted above, it is more likely than not that all other deferred tax assets will be realized.

Under U.S. income tax rules, only 35% of non-life operating losses can be offset against life insurance taxable income each year. For current U.S. income tax purposes, as of December 31, 2022, there were non-life operating loss carryforwards of $18 million available to offset against future taxable income, all of which do not expire. The Company has no capital loss carryforwards available to offset capital gains. The Company has foreign tax credit carryforwards of $65 million available to offset against future excess foreign taxes paid, $20 million of which expire in 2030, $20 million of which expire in 2031 and $25 million of which expire in 2032.

The Company files federal income tax returns in the U.S. and Japan as well as state or prefecture income tax returns in various jurisdictions in the two countries. The Company's amended 2017-2019 federal income tax returns are currently under audit by the Internal Revenue Service. There are currently no other open Federal, State, or local U.S. income tax audits. U.S. federal income tax returns for years before 2016 are no longer subject to examination. In Japan, the corporate income tax returns for fiscal years ending March 31, 2020, 2021 and 2022 are currently under audit. Japan corporate income tax returns for years before 2016 are no longer subject to examination. Management believes it has established adequate tax liabilities and final resolution of all open audits is not expected to have a material impact on the Company's consolidated financial statements.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended December 31:
(In millions)2022 2021 
Balance, beginning of year$5 $19 
Additions for tax positions of prior years0   1   
Reductions for tax positions of prior years0   (15)
Balance, end of year$5 $5 

Included in the balance of the liability for unrecognized tax benefits at December 31, 2022 and 2021, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period. The Company has accrued approximately $5 million as of December 31, 2022, for permanent uncertainties, which if reversed would not have a material effect on the annual effective rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognized an immaterial amount of interest and penalties in 2022, compared with approximately $1 million in both 2021 and 2020. The Company accrued an immaterial amount for the payment of interest and penalties as of December 31, 2022 and 2021, respectively.

As of December 31, 2022, there were no material uncertain tax positions for which the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months.