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 2013 and 2014 federal income tax returns. The Allstate Group’s tax years prior to 2013 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 a $1 million liability for unrecognized tax benefits as of both December 31, 2016 and 2015. The Company had no liability for unrecognized tax benefits as of December 3l, 2014. The change in the liability for unrecognized tax benefits in 2015 related to the increase for tax positions taken in a prior year. The Company believes it is reasonably possible that the liability balance will not significantly increase within the next twelve months. Because of the impact of deferred tax accounting, recognition of previously unrecognized tax benefits is not expected to impact the Company’s effective tax rate.

The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense. The Company did not record interest income or expense relating to unrecognized tax benefits in income tax expense in 2016, 2015 or 2014. As of December 31, 2016 and 2015, there was no interest accrued with respect to unrecognized tax benefits. No amounts have been accrued for penalties.

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



($ in millions)	2016			2015
Deferred assets
Deferred reinsurance gain	$	16		$	17
Difference in tax bases of investments	—			46
Other assets	4			9
Total deferred assets	20			72
Deferred liabilities
DAC	(370		)	(387		)
Unrealized net capital gains	(369		)	(287		)
Life and annuity reserves	(362		)	(309		)
Difference in tax bases of investments	(35		)	—
Other liabilities	(75		)	(75		)
Total deferred liabilities	(1,211		)	(1,058		)
Net deferred liability	$	(1,191	)	$	(986	)

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)	2016		2015		2014
Current	$	24	$	251	$	101
Deferred	120		50		132
Total income tax expense	$	144	$	301	$	233

The Company received a refund of $22 million in 2016 and paid income taxes of $221 million and $80 million in 2015 and 2014, respectively. The Company had current income tax receivable of $16 million and $30 million as of December 31, 2016 and 2015, respectively.

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:



	2016		2015		2014
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
Tax credits	(3.3	)	(1.7	)	(1.9	)
Dividends received deduction	(1.3	)	(0.6	)	(0.9	)
Adjustments to prior year tax liabilities	—		(0.3	)	(0.2	)
Sale of subsidiary	—		—		(1.8	)
State income taxes	0.3		0.4		0.1
Non-deductible expenses	0.2		0.2		0.2
Change in accounting for investments in qualified affordable housing projects	—		2.0		—
Other	0.1		(0.1	)	0.2
Effective income tax rate	31.0	%	34.9	%	30.7	%