Income Taxes

ALIC and its subsidiaries (the “Allstate Life Group”) join with the Corporation (the “Allstate Group”) in the filing of a consolidated federal income tax return and are party to a federal income tax allocation agreement (the “Allstate Tax Sharing Agreement”). Under the Allstate Tax Sharing Agreement, the Allstate Life Group pays to or receives from the Corporation the amount, if any, by which the Allstate Group’s federal income tax liability is affected by virtue of inclusion of the Allstate Life Group in the consolidated federal income tax return. Effectively, this results in the Allstate Life Group’s annual income tax provision being computed, with adjustments, as if the Allstate Life Group filed a separate return.

The Internal Revenue Service (“IRS”) is currently examining the Allstate Group’s 2011 and 2012 federal income tax returns. The IRS has completed its examination of the Allstate Group’s 2009 and 2010 federal income tax returns and a final settlement related to the examination was approved by the IRS Appeals Division on September 19, 2014. The Allstate Group’s tax years prior to 2009 have been examined by the IRS and the statute of limitations has expired on those years. Any adjustments that may result from IRS examinations of the Allstate Group’s tax returns are not expected to have a material effect on the results of operations, cash flows or financial position of the Company.

The Company had no liability for unrecognized tax benefits as of December 31, 2014, 2013 or 2012, and believes it is reasonably possible that the liability balance will not significantly increase within the next twelve months. No amounts have been accrued for interest or penalties.

The components of the deferred income tax assets and liabilities as of December 31 are as follows:



($ in millions)	2014			2013
Deferred assets
Difference in tax bases of investments	$	31		$	44
Deferred reinsurance gain	20			23
Sale of subsidiary	—			173
Other assets	15			6
Total deferred assets	66			246
Deferred liabilities
Unrealized net capital gains	(747		)	(501		)
DAC	(396		)	(470		)
Life and annuity reserves	(255		)	(273		)
Other liabilities	(75		)	(94		)
Total deferred liabilities	(1,473		)	(1,338		)

Net deferred liability before classification as held for sale	(1,407		)	(1,092		)

Deferred taxes classified as held for sale	—			(151		)

Net deferred liability	$	(1,407	)	$	(941	)

Although realization is not assured, management believes it is more likely than not that the deferred tax assets will be realized based on the Company’s assessment that the deductions ultimately recognized for tax purposes will be fully utilized.

The components of income tax expense for the years ended December 31 are as follows:



($ in millions)	2014		2013			2012
Current	$	101	$	71		$	(82	)
Deferred	132		(52		)	261
Total income tax expense	$	233	$	19		$	179

The Company paid income taxes of $80 million in 2014 and received refunds of $11 million and $58 million in 2013 and 2012, respectively. The Company had current income tax receivable of $7 million as of December 31, 2014 and current income tax payable of $5 million as of December 31, 2013.

A reconciliation of the statutory federal income tax rate to the effective income tax rate on income from operations for the years ended December 31 is as follows:



	2014		2013		2012
Statutory federal income tax rate - (benefit) expense	35.0	%	(35.0	)%	35.0	%
Tax credits	(1.9	)	(181.8	)	(3.8	)
Dividends received deduction	(0.9	)	(46.1	)	(1.4	)
Adjustments to prior year tax liabilities	(0.2	)	(14.1	)	(0.3	)
Sale of subsidiary	(1.8	)	351.3		—
State income taxes	0.1		15.3		—
Non-deductible expenses	0.2		6.8		0.1
Other	0.2		0.1		—
Effective income tax rate - expense	30.7	%	96.5	%	29.6	%