Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

The components of income tax provision attributable to continuing operations were as follows:

	Years Ended December 31,
	2021		2020		2019
	(in millions)
Current income tax
Federal	$	551	$	527	$	531
State and local	79		63		80
Foreign	47		28		36
Total current income tax	677		618		647
Deferred income tax
Federal	(62)		(309)		(297)
State and local	(3)		(16)		(13)
Foreign	(22)		4		2
Total deferred income tax	(87)		(321)		(308)
Total income tax provision	$	590	$	297	$	339

The geographic sources of pretax income from continuing operations were as follows:

	Years Ended December 31,
	2021		2020		2019
	(in millions)
United States	$	3,126	$	1,685	$	2,045
Foreign	224		146		187
Total	$	3,350	$	1,831	$	2,232

The principal reasons that the aggregate income tax provision attributable to continuing operations is different from that computed by using the U.S. statutory rates of 21% were as follows:

	Years Ended December 31,
	2021		2020		2019
Tax at U.S. statutory rate	21.0	%	21.0	%	21.0	%
Changes in taxes resulting from:
Low income housing tax credits	(2.0)		(4.3)		(3.6)
State taxes, net of federal benefit	1.8		2.1		2.4
Incentive compensation	(1.6)		(1.4)		—
Dividends received deduction	—		(2.1)		(1.8)
Foreign tax credits, net of addback	—		—		(2.2)
Other, net	(1.6)		0.9		(0.6)
Income tax provision	17.6	%	16.2	%	15.2	%

The increase in the Company’s effective tax rate for the year ended December 31, 2021 compared to 2020 is primarily the result of a decrease in the dividends received deduction and low income housing tax credits, partially offset by various other adjustments.

Deferred income tax assets and liabilities result from temporary differences between the assets and liabilities measured for GAAP reporting versus income tax return purposes. Deferred income tax assets and liabilities are measured at the statutory rate of 21% as of both December 31, 2021 and 2020. The significant components of the Company’s deferred income tax assets and liabilities, which are included net within Other assets or Other liabilities, were as follows:

	December 31,
	2021		2020
	(in millions)
Deferred income tax assets
Liabilities for policyholder account balances, future policy benefits and claims	$	1,996	$	1,618
Deferred compensation	586		493
Right of use lease liability	73		60
Postretirement benefits	—		65
Other	106		51
Gross deferred income tax assets	2,761		2,287
Less: valuation allowance	32		15
Total deferred income tax assets	2,729		2,272
Deferred income tax liabilities
Investment related	565		253
Deferred acquisition costs	481		435
Intangible assets	209		124
Net unrealized gains on Available-for-Sale securities	113		295
Depreciation expense	89		99
Goodwill	77		70
Right of use lease asset	62		54
Deferred sales inducement costs	—		44
Other	45		18
Gross deferred income tax liabilities	1,641		1,392
Net deferred income tax assets	$	1,088	$	880

Included in the Company’s deferred income tax assets are tax benefits primarily related to state net operating losses of $12 million, net of federal benefit, which will expire beginning December 31, 2022 and foreign net operating losses of $42 million. Based on analysis of the Company’s tax position, management believes it is more likely than not that the Company will not realize certain state net operating losses of $11 million, state deferred tax assets of $3 million and foreign deferred tax assets of $18 million; therefore, a valuation allowance of $32 million has been established.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows:

	2021		2020		2019
	(in millions)
Balance at January 1	$	110	$	100	$	92
Additions based on tax positions related to the current year	21		11		15
Reductions based on tax positions related to the current year	(1)		(1)		—
Additions for tax positions of prior years	5		10		39
Reductions for tax positions of prior years	(8)		(4)		(17)
Reductions due to lapse of statute of limitations	(1)		(5)		—
Audit settlements	(1)		(1)		(29)
Balance at December 31	$	125	$	110	$	100

If recognized, approximately $95 million, $80 million and $67 million, net of federal tax benefits, of unrecognized tax benefits as of December 31, 2021, 2020, and 2019, respectively, would affect the effective tax rate.

It is reasonably possible that the total amount of unrecognized tax benefits will change in the next 12 months. The Company estimates that the total amount of gross unrecognized tax benefits may decrease by $50 million to $60 million in the next 12 months primarily

due to Internal Revenue Service (“IRS”) settlements and state exams.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. The Company recognized nil, a net increase of $2 million, and a net decrease of $2 million, in interest and penalties for the years ended December 31, 2021, 2020, and 2019, respectively. As of both December 31, 2021 and 2020, the Company had a payable of $10 million related to accrued interest and penalties.

The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The federal statute of limitations are closed on years through 2015, except for one issue for 2014 and 2015 which was claimed on amended returns. The IRS is currently auditing the Company’s U.S. income tax returns for 2016 through 2020. The Company’s state income tax returns are currently under examination by various jurisdictions for years ranging from 2015 through 2019.