Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

The following are the major jurisdictions in which Ambac and its affiliates operate and the earliest tax years subject to examination:



Jurisdiction	Tax Year
United States	2010
New York State	2011
New York City	2011
United Kingdom	2011
Italy	2010

Significant Portions of Deferred Tax Liabilities and Deferred Tax Assets

The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at December 31, 2015 and 2014 are presented below:



December 31	2015			2014
Deferred tax liabilities:
Insurance intangible	$	424,239		$	493,822
Variable interest entities	10,053			14,149
Investments	66,278			136,017
Unearned premiums and credit fees	98,945			104,589
Other	34,025			33,835
Total deferred tax liabilities	633,540			782,412
Deferred tax assets:
Net operating loss and capital carryforward	1,504,569			1,890,551
Loss reserves	122,635			185,881
Compensation	2,839			2,004
AMT Credits	27,252			10,359
Other	9,913			9,539
Sub total deferred tax assets	1,667,208			2,098,334
Valuation allowance	1,035,873			1,318,001
Total deferred tax assets	631,335			780,333
Net deferred tax asset (liability)	$	(2,205	)	$	(2,079	)

Schedule of Components of Income Tax Expense (Benefit)

Ambac’s provision for income taxes charged to income from continuing operations is comprised of the following:



	Successor Ambac						Predecessor Ambac
					Period from May 1		Period from Jan 1
	Year Ended December 31,				through		through
	2015		2014		December 31, 2013		April 30, 2013
Current taxes	$	17,077	$	9,463	$	6,984	$	761
Deferred taxes	287		94		530		(6		)
Total	$	17,364	$	9,557	$	7,514	$	755

Schedule Of Income Taxes Charged Credited Directly To Equity

The total effect of income taxes on net income and stockholders’ equity for the years ended December 31, 2015, 2014 and 2013 is as follows:



	Successor Ambac									Predecessor Ambac
							Period from May 1			Period from Jan 1
	Year Ended December 31,						through			through
	2015			2014			December 31, 2013			April 30, 2013
Total income taxes charged to net income	$	17,364		$	9,557		$	7,514		$	755
Income taxes charged (credited) to stockholders’ equity:
Unrealized gains (losses) on investment securities	(55,906		)	88,411			(14,669		)	(227,945		)
Unrealized gains (losses) on foreign currency translations	(15,628		)	(15,108		)	14,953			7,010
Change in retirement benefits	(240		)	(285		)	3,797			1,594
Valuation allowance to equity	71,774			(73,018		)	(4,081		)	219,341
Total effect of income taxes	$	17,364		$	9,557		$	7,514		$	755

Schedule of Effective Income Tax Rate Reconciliation

The tax provisions in the accompanying Consolidated Statements of Total Comprehensive Loss reflect effective tax rates differing from prevailing Federal corporate income tax rates. The following is a reconciliation of these differences:



	Successor Ambac												Predecessor Ambac
									Period from May 1				Period from Jan 1
	Year Ended December 31,								through				through
	2015				2014				December 31, 2013				April 30, 2013
	$		%		$		%		$		%		$		%
Tax on income from continuing operations at statutory rate	178,521		35.0	%	172,639		35.0	%	179,311		35.0	%	1,171,812		35.0	%
Changes in expected tax resulting from:
Tax-exempt interest	(1,454	)	(0.3	)%	(6,811	)	(1.4	)%	(11,988	)	(2.3	)%	(4,996	)	(0.1	)%
Goodwill impairment	180,079		35.3	%	—		—	%	—		—	%	—		—	%
Foreign taxes	288		0.1	%	3,472		0.7	%	—		—	%	—		—	%
Valuation allowance	(340,133	)	(66.7	)%	(159,661	)	(32.4	)%	(160,064	)	(31.2	)%	(1,110,230	)	(33.2	)%
Reorganization income	—		—	%	—		—	%	—		—	%	(712,581	)	(21.3	)%
Tax bankruptcy adjustments	—		—	%	—		—	%	—		—	%	285,734		8.5	%
IRS Settlement	—		—	%	—		—	%	—		—	%	370,996		11.1	%
Other, net	63		—	%	(82	)	—	%	255		—	%	20		—	%
Tax expense on income from continuing operations	17,364		3.4	%	9,557		1.9	%	7,514		1.5	%	755		—	%

Schedule of Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2015 and 2014 is as follows:



	Successor Ambac			Predecessor Ambac
			Period from May 1	Period from Jan 1
	Year Ended December 31,		through	through
	2015	2014	December 31, 2013	April 30, 2013
Balance, beginning of period	—	—	—	96,900
Increases related to prior year tax positions	—	—	—	—
Decreases related to prior year tax positions⁽¹⁾	—	—	—	(96,900	)
Balance, end of period	—	—	—	—


(1)	Amount paid in connection with IRS settlement as noted above.

Schedule of Net Operating Loss And Tax Credit Carryovers

Pursuant to the Amended TSA, to the extent Ambac Assurance generates taxable income after September 30, 2011, which is offset with NOLs (or the proportionate amount of AMT NOL (as defined below)), it is obligated to make payments (“Tolling Payments”), subject to certain credits, to Ambac in accordance with the following NOL usage table, where the “Applicable Percentage” is applied to the aggregate amount of federal income tax liability that would have been paid if the “Allocated NOLs” were not available:

NOL Usage Table



NOL Usage Tier	Allocated NOLs⁽¹⁾			Applicable Percentage
A	The first	$479,000		15%
B	The next	$1,057,000	after Tier A	40%
C	The next	$1,057,000	after Tier B	10%
D	The next	$1,057,000	after Tier C	15%


(1)	Bankruptcy-related credits offset the first $5 million payment due under each of the NOL usage Tiers A, B and C. Pursuant to the Internal Revenue Service closing agreement the United States Department of Treasury receives 12.5% of Tier C and 17.5% of Tier D Tolling Payments.