Note 9: Income Taxes

The

Company’s income taxes and the related effective tax rates for the three months ended March 31, 2022 and 2021 are as follows:


	Three Months Ended March 31,
In millions	2022			2021
Income (loss) before income taxes	$	(73	)	$	(106	)
Provision (benefit) for income taxes	$	-		$	-
Effective tax rate		0.0%			0.0%

For the three months ended March 31, 2022 and 2021, the Company’s effective tax rate applied to its loss before income taxes was lower than the U.S. statutory tax rate due to the full valuation allowance on the changes in its net deferred tax asset.

Deferred Tax Asset, Net of Valuation Allowance

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of its existing deferred tax assets. A significant piece of objective negative evidence evaluated was the Company having a three-year cumulative loss. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections of

pre-tax

income. On the basis of this evaluation, the Company has recorded a full valuation allowance against its net deferred tax asset of $1.1

billion as of March 31, 2022 and December 31, 2021. The Company will continue to analyze the valuation allowance on a quarterly basis.

Net operating losses (“NOLs”) of

property and casualty insurance companies are permitted to be carried back two years and carried forward 20 years. NOLs of property and casualty insurance companies are not subject to the 80 percent taxable income limitation and indefinite lived carryforward period required by the Tax Cuts and Jobs Act applicable to general corporate NOLs.

Accounting for Uncertainty in Income Taxes

The Company’s policy is to record and disclose any change in unrecognized tax benefit (“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. As of March 31, 2022 and December 31, 2021, the Company had no UTB.

Federal income tax returns through 2011 have been examined or surveyed. As of March 31, 2022, the Company’s NOL is approximately $3.7 billion. NOLs generated prior to tax reform and property and casualty NOLs generated after tax reform will expire between tax years 2031 through 2042. As of March 31, 2022, the Company has a foreign tax credit carryforward of $58 million, which will expire between tax years 2022 through 2032.

Section 382 of the Internal Revenue Code

On May 2, 2018, MBIA Inc.’s shareholders ratified an amendment to the Company’s

By-Laws,

which had been adopted earlier by MBIA Inc.’s Board of Directors. The amendment places restrictions on certain acquisitions of Company stock that otherwise may have increased the likelihood of an ownership change within the meaning of Section 382 of the Internal Revenue Code. With certain exceptions, the amendment generally prohibits a person from becoming a “Section 382 five-percent shareholder” by acquiring, directly or by attribution, 5% or more of the outstanding shares of the Company’s common stock.