The Company's income taxes and the related effective tax rates for the three months ended March 31, 2014 and 2013 are as follows:

		Three Months Ended March 31,
In millions		2014		2013
Income (loss) before income taxes	$	404	$	215
Provision (benefit) for income taxes	$	148	$	51
Effective tax rate		36.6%		23.7%

For the three months ended March 31, 2014, the Company's effective tax rate applied to its pre-tax income was higher than the U.S. statutory tax rate primarily as a result of certain non tax deductible expenses and the increase in the valuation allowance against its deferred tax asset.

For the three months ended March 31, 2013, the Company's effective tax rate applied to its pre-tax income was lower than the U.S. statutory tax rate primarily as a result of the decrease in the valuation allowance against its deferred tax asset.

The Company's provision for income taxes for interim financial periods is not based on an estimated annual effective rate due to the variability in fair value of its credit derivatives, which prevents the Company from projecting a reliable estimated annual effective tax rate and pretax income for the full year of 2014. A discrete calculation of the provision is calculated for each interim period.

The Company establishes a valuation allowance against its deferred tax asset when it is more likely than not that all or a portion of the deferred tax asset will not be realized. All evidence, both positive and negative, needs to be identified and considered in making the determination. Future realization of the existing deferred tax asset ultimately depends, in part, on the generation of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under the tax law.

As of March 31, 2014, the Company reported a net deferred tax asset of $917 million which is net of a $95 million valuation allowance. As of March 31, 2014, the Company had a valuation allowance against a portion of the deferred tax asset related to losses from asset impairments. The valuation allowance as of March 31, 2014 reflects an increase of $2 million from the December 31, 2013 valuation allowance of $93 million. The increase in the valuation allowance for the three months ended March 31, 2014 was primarily due to asset impairments which are characterized as capital.

The Company has a tax sharing agreement among its members effective January 1, 1987. The agreement was amended and restated effective September 8, 2011 to change the method of calculating each domestic insurer's tax liability to the method permitted by paragraph 3(a) of Department Circular Letter #33 (1979). The agreement was submitted to the NYSDFS for review and non-disapproval pursuant to Section 1505 of the New York Insurance Law. Refer to “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, for further discussion on the Company's tax sharing agreement.

The Company's policy is to record and disclose any change in UTB and related interest and/or penalties to income tax in the consolidated statements of operations. The Company includes interest as a component of income tax expense. The amounts in the table below do not include accrued interest of $2 million. All amounts below are reflected before any applicable tax benefit.

In millions
Unrecognized tax benefit as of December 31, 2013		$	65
The gross amount of the increase/(decrease) in the UTB as a result of tax positions taken:
	During a prior year		0
	During the current year		0
The amounts of decreases in the UTB related to settlements with taxing authorities			0
The reduction in the UTB as a result of the applicable statute of limitations			0
Unrecognized tax benefit as of March 31, 2014		$	65

The Company does not anticipate any amount to reverse in the next twelve months based on settling certain issues.

In 2013, the Internal Revenue Service contacted the Company to review the 2011 consolidated return of MBIA Inc. and its subsidiaries, for the purpose of determining whether to formally examine the tax return. To date no formal examination has been initiated.

The U.K. tax authorities are currently auditing tax years 2005 through 2011. On June 5, 2013, the Company met with the HM Revenue & Customs (“HMRC”). During the third and fourth quarters of 2013 the Company sent HMRC additional information supporting its position. On January 24, 2014, the Company provided an independent report to HMRC. On April 8, 2014, HMRC responded with comments. The Company will be responding to HMRC in anticipation of another meeting. As of the first quarter of 2014, there has been no resolution.

During 2013, the Company met with New York State Department of Taxation and Finance to discuss the Company's respective positions regarding certain issues related to the 2008 tax year. Discussions are ongoing and the Company has presented its technical position in writing to the State.

As of December 31, 2013, the Company's NOL is approximately $2.8 billion which will expire between tax years 2029 through 2033. As of December 31, 2013, the Company has an alternative minimum tax credit carryforward of $22 million, which does not expire. As a result of the commutation of CMBS exposure that occurred during the three months ended March 31, 2014, the Company's NOL is approximately $3.1 billion as of March 31, 2014.