Income Tax (Tables)

12 Months Ended

Dec. 31, 2017

Impact of U.S. Tax Reform [Table Text Block]

The incremental financial statement impact related to U.S. Tax Reform was as follows:



	U.S. Tax Reform
	(In millions)
Income (loss) from continuing operations before provision for income tax	$	(289	)
Provision for income tax expense (benefit):
Deemed repatriation	170
Deferred tax revaluation	(1,790		)
Total provision for income tax expense (benefit)	(1,620		)
Income (loss) from continuing operations, net of income tax	1,331
Income tax (expense) benefit related to items of other comprehensive income (loss)	144
Increase to net equity from U.S. Tax Reform	$	1,475

The incremental financial statement impact related to U.S. Tax Reform was as follows:



	U.S. Tax Reform
	(In millions)
Income (loss) from continuing operations before provision for income tax	$	(289	)
Provision for income tax expense (benefit):
Deemed repatriation	170
Deferred tax revaluation	(1,790		)
Total provision for income tax expense (benefit)	(1,620		)
Income (loss) from continuing operations, net of income tax	1,331
Income tax (expense) benefit related to items of other comprehensive income (loss)	144
Increase to net equity from U.S. Tax Reform	$	1,475

Provision for income tax from continuing operations

The provision for income tax from continuing operations was as follows:



	Years Ended December 31,
	2017			2016			2015
	(In millions)
Current:
Federal	$	(246	)	$	520		$	632
State and local	5			3			10
Foreign	891			628			556
Subtotal	650			1,151			1,198
Deferred:
Federal	(2,373		)	(827		)	194
Foreign	253			369			198
Subtotal	(2,120		)	(458		)	392
Provision for income tax expense (benefit)	$	(1,470	)	$	693		$	1,590

Income (loss) from continuing operations before income tax expense (benefit) from domestic and foreign operations

The Company’s income (loss) from continuing operations before income tax expense (benefit) from domestic and foreign operations were as follows:



	Years Ended December 31,
	2017		2016		2015
	(In millions)
Income (loss) from continuing operations:
Domestic	$	684	$	185	$	1,874
Foreign	2,852		4,096		3,777
Total	$	3,536	$	4,281	$	5,651

Income tax for continuing operations effective rate reconciliation

The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations was as follows:



	Years Ended December 31,
	2017			2016			2015
	(In millions)
Tax provision at U.S. statutory rate	$	1,238		$	1,498		$	1,977
Tax effect of:
Dividend received deduction	(67		)	(69		)	(71		)
Tax-exempt income	(97		)	(86		)	(70		)
Prior year tax (1)	(27		)	(13		)	559
Low income housing tax credits	(278		)	(270		)	(221		)
Other tax credits	(102		)	(98		)	(67		)
Foreign tax rate differential (2), (3), (4)	(95		)	(332		)	(555		)
Change in valuation allowance	(8		)	(9		)	5
Separation tax benefits	(540		)	—			—
U.S. Tax Reform impact (5)	(1,519		)	—			—
Other, net	25			72			33
Provision for income tax expense (benefit)	$	(1,470	)	$	693		$	1,590

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(1)	As discussed further below, for the year ended December 31, 2015, prior year tax includes a $557 million non-cash charge related to an uncertain tax position.

(2)

For the year ended December 31, 2017, foreign tax rate differential includes a net tax charge of $180 million as a result of repatriation. Included in the net tax charge of $180 million is a $444 million tax charge related to the repatriation of approximately $3.0 billion of pre-2017 earnings following the post-Separation review of the Company’s capital needs. This charge was partially offset by a $264 million tax benefit associated with dividends from other non-U.S. operations. This charge was recorded prior to U.S. Tax Reform and is incremental to the $170 million repatriation transition tax recorded for the year ended December 31, 2017.


(3)	For the year ended December 31, 2016, foreign tax rate differential includes a tax benefit of $110 million in Japan related to a change in tax rate, offset by a tax charge of $19 million in Chile related to a change in tax rate.

(4)

For the year ended December 31, 2015, foreign tax rate differential includes tax benefits of $174 million related to a Japan tax rate change, $61 million related to restructuring in Chile, $57 million related to the repatriation of earnings from Japan, $41 million related to certain non-portfolio net investment gains that were non-taxable and $31 million related to the devaluation of the peso in Argentina. These benefits were partially offset by charges of $23 million related to the impact of foreign exchange on investment gains in Argentina.


(5)	U.S. Tax Reform impact of ($1.5) billion excludes ($101) million of tax provision at the U.S. statutory rate for a total tax reform benefit of ($1.6) billion.

Components of deferred tax assets and liabilities

Deferred income tax represents the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following at:



	December 31,
	2017			2016
	(In millions)
Deferred income tax assets:
Policyholder liabilities and receivables	$	2,654		$	2,029
Net operating loss carryforwards	512			1,420
Employee benefits	802			1,045
Capital loss carryforwards	6			9
Tax credit carryforwards	1,322			1,375
Litigation-related and government mandated	160			268
Other	657			743
Total gross deferred income tax assets	6,113			6,889
Less: Valuation allowance	189			161
Total net deferred income tax assets	5,924			6,728
Deferred income tax liabilities:
Investments, including derivatives	2,772			2,940
Intangibles	1,321			1,213
Net unrealized investment gains	4,783			5,423
DAC	3,206			3,619
Other	609			425
Total deferred income tax liabilities	12,691			13,620
Net deferred income tax asset (liability)	$	(6,767	)	$	(6,892	)

Summary of net operating loss carryforwards for tax purposes

The following table sets forth the domestic, state, and foreign net operating loss carryforwards and the domestic capital loss carryforwards for tax purposes at December 31, 2017.



	Net Operating Loss Carryforwards						Capital Loss Carryforwards
	Domestic		State		Foreign		Domestic
	(In millions)
Expiration:
2018-2022	$	1	$	49	$	46	$	27
2023-2027	—		64		28		—
2028-2032	8		13		—		—
2033-2037	2,095		2		—		—
Indefinite	—		—		397		—
	$	2,104	$	128	$	471	$	27

Summary of Tax Credit Carryforwards

The following table sets forth the general business credits, foreign tax credits, and other credit carryforwards for tax purposes at December 31, 2017.



	Tax Credit Carryforwards
	General Business Credits		Foreign Tax Credits		Other
	(In millions)
Expiration:
2018-2022	$	—	$	42	$	—
2023-2027	—		200		—
2028-2032	236		1		—
2033-2037	832		—		—
Indefinite	—		21		263
	$	1,068	$	264	$	263

Reconciliation of unrecognized tax benefits

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



	Years Ended December 31,
	2017			2016			2015
	(In millions)
Balance at January 1,	$	1,146		$	1,259		$	719
Additions for tax positions of prior years (1)	70			24			574
Reductions for tax positions of prior years	(101		)	(112		)	(24		)
Additions for tax positions of current year	33			23			24
Reductions for tax positions of current year	(3		)	—			—
Settlements with tax authorities	(43		)	(48		)	(34		)
Balance at December 31, (1)	$	1,102		$	1,146		$	1,259
Unrecognized tax benefits that, if recognized, would impact the effective rate	$	1,073		$	1,112		$	1,215

__________________

(1)

The significant increase in 2015 is related to a non-cash charge the Company recorded to net income of $792 million, net of tax. The charge was related to an uncertain tax position and was comprised of a $557 million charge included in provision for income tax expense (benefit) and a $362 million ($235 million, net of tax) charge included in other expenses. This charge is the result of the Company’s consideration of certain decisions of the U.S. Court of Appeals for the Second Circuit upholding the disallowance of foreign tax credits claimed by other corporate entities not affiliated with the Company. The Company’s action relates to tax years from 2000 to 2009, during which MLIC held non-U.S. investments in support of its life insurance business through a United Kingdom investment subsidiary that was structured as a joint venture at the time.

Interest was as follows:



	Years Ended December 31,
	2017		2016			2015
	(In millions)
Interest recognized on the consolidated statements of operations (1)	$	37	$	(41	)	$	388

			December 31,
			2017			2016
			(In millions)
Interest included in other liabilities on the consolidated balance sheets			$	659		$	623

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(1)	The significant increase in 2015 is related to the non-cash charge discussed above.