Income Taxes

A reconciliation of the tax provision at the U.S. federal statutory rate to the provision (benefit) for income taxes is as follows:



	Three Months Ended March 31,
	2015			2014
Tax provision at U.S. federal statutory rate	$	219		$	213
Tax-exempt interest	(34		)	(35		)
Dividends-received deduction ("DRD")	(23		)	(27		)
Valuation allowance	(1		)	—
Other	(3		)	(8		)
Provision for income taxes	$	158		$	143

The separate account DRD is estimated for the current year using information from the most recent return, adjusted for current year equity market performance and other appropriate factors, including estimated levels of corporate dividend payments and level of policy owner equity account balances. The actual current year DRD can vary from estimates based on, but not limited to, changes in eligible dividends received in the mutual funds, amounts of distribution from these mutual funds, amounts of short-term capital gains at the mutual fund level and the Company’s taxable income before the DRD. The Company evaluates its DRD computations on a quarterly basis.

Net deferred income taxes include the future tax benefits associated with the net operating loss carryover, foreign tax credit carryover, capital loss carryover, and alternative minimum tax credit carryover as follows:



	As of
	March 31, 2015				December 31, 2014				Expiration
	Carryover amount		Expected tax benefit, gross		Carryover amount		Expected tax benefit, gross		Dates			Amount
Net operating loss carryover	$	5,485	$	1,915	$	5,547	$	1,936	2016	-	2017	$	3
									2023	-	2033	$	5,482
Foreign tax credit carryover	$	180	$	180	$	178	$	178	2018	-	2025	$	180
Capital loss carryover	$	494	$	173	$	491	$	172	2019			$	491
									2020			$	3
Alternative minimum tax credit carryover	$	652	$	652	$	652	$	652	No expiration			$	—

Net operating loss carryover

As of March 31, 2015 and December 31, 2014, the net deferred tax asset included the expected tax benefit attributable to net operating losses of $5,485 and $5,547, respectively, consisting of U.S. losses of $5,451 and $5,508, respectively, and foreign losses of $34 and $39. If unutilized, the U.S. losses expire as follows: $3 from 2016-2017, $5,482 from 2023-2033. Utilization of these loss carryovers is dependent upon the generation of sufficient future taxable income. Due to limitations on the use of certain losses, a valuation allowance of $8 has been established as of March 31, 2015 and $9 as of December 31, 2014 in order to recognize only the portion of net operating losses that will more likely than not be realized.

Most of the net operating loss carryover originated from the Company's U.S. and international annuity business, including from the hedging program. Given the sale of the Japan subsidiary in June 2014, and continued runoff of the U.S. fixed and variable annuity business, the exposure to taxable losses from the Talcott Resolution business is significantly lessened. Given the expected earnings of its property and casualty, group benefits and mutual fund businesses, the Company expects to generate sufficient taxable income in the future to utilize its net operating loss carryover net of the recorded valuation allowance. Although the Company projects there will be sufficient future taxable income to fully recover the remainder of the loss carryover, the Company's estimate of the likely realization may change over time.

Alternative minimum tax credit and foreign tax credit carryover

As of March 31, 2015 and December 31, 2014, the net deferred tax asset included the expected tax benefit attributable to alternative minimum tax credit carryover of $652 and $652, respectively, and foreign tax credit carryover of $180 and $178, respectively. The alternative minimum tax credits have no expiration date and the foreign tax credit carryover expire from 2018-2025. These credits are available to offset regular federal income taxes from future taxable income and although the Company believes there will be sufficient future regular federal taxable income, there can be no certainty that future events will not affect the ability to utilize the credits. Additionally, the use of the foreign tax credits generally depends on the generation of sufficient taxable income to first utilize all U.S. net operating loss carryover. However, the Company has identified and begun to purchase certain investments which allow for utilization of the foreign tax credits without first using the net operating loss carryover. Consequently, the Company believes it is more likely than not the foreign tax credit carryover will be fully realized. Accordingly, no valuation allowance has been provided on either the alternative minimum tax carryover or foreign tax credit carryover.

Capital loss carryover

As of March 31, 2015 and December 31, 2014, the net deferred tax asset included the expected tax benefit attributable to the capital loss carryover of $494 and $491, respectively. The capital loss carryover is largely due to the loss on sale of the Company’s Japan subsidiary, HLIKK. If unutilized, $491 of the capital loss carryover will expire in 2019 and $3 in 2020. Utilization of the capital loss carryover requires the Company to realize sufficient taxable capital gains. While the Company has some ability to utilize the capital loss carryover by generating capital gains through tax planning strategies, the Company concluded that it is more likely than not that this asset will not be realized and, accordingly, in 2014, the Company recorded a valuation allowance of $172 through discontinued operations.

The Company’s unrecognized tax benefits were unchanged during the years ended December 31, 2014, 2013, and 2012, remaining at $48 as of March 31, 2015 and December 31, 2014. This entire amount, if it were recognized, would affect the effective tax rate in the period it is released.

The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years prior to 2007. The federal audit of the years 2007-2011 is expected to conclude in 2015 and it is reasonably possible the Company may be able to reduce part of or the entire amount of the unrecognized tax benefits within the next 12 months. Apart from the possible reduction in unrecognized tax benefits, management does not expect the conclusion of the federal audit for the 2007-2011 years will have a material impact on the consolidated financial condition or results of operations. The federal audit of the years 2012 and 2013 began in March 2015 and is expected to be completed in 2016. Management believes that adequate provision has been made in the financial statements for any potential assessments that may result from tax examinations and other tax-related matters for all open tax years.