14.INCOME TAXES

In the IRS audit that concluded in 2012, the IRS proposed favorable and unfavorable adjustments to the Company’s 2003 through 2007 reported taxable incomes. The Company protested certain unfavorable adjustments and is seeking resolution at the IRS’ Appeals Division. If the IRS prevails at Appeals, and the Company does not litigate these issues, an acceleration of tax payments will occur. However, such payments, if they were to occur, would not materially impact the Company or its effective tax rate.

In conjunction with the Merger and as a result of the adjustments to the Company’s assets and liabilities which were discussed in Note 2, Summary of Significant Accounting Policies, the Company’s deferred tax assets and liabilities were remeasured as of the date of the Merger.

The components of the Company’s net deferred income tax liability are as follows:

	Successor			Predecessor
	Company			Company
	As of			As of
	March 31, 2015			December 31, 2014
	(Dollars In Thousands)			(Dollars In Thousands)
Deferred income tax assets:
Loss and credit carryforwards	$	62,047		$	516
Premium receivables and policy liabilities	—			95,298
Deferred compensation	223,593			194,223
Invested assets (other than unrealized gains)	—			63,901
Deferred policy acquisition costs	459,122			—
Premium on corporate debt	122,199			—
Unrealized loss on investments	157,505			—
Valuation allowance	(2,047		)	(2,206		)
	1,022,419			351,732
Deferred income tax liabilities:
Premium receivables and policy liabilities	37,172			—
VOBA and other intangibles	686,836			—
DAC and VOBA	—			1,078,533
Invested assets (other than unrealized gains)	1,666,936			—
Net unrealized gains (losses) on investments				799,123
Other	38,035			19,554
	2,428,979			1,897,210
Net deferred income tax liability	$	(1,406,560	)	$	(1,545,478	)

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

	Successor			Predecessor
	Company			Company
	February 1, 2015			January 1, 2015
	to			to			As of
	March 31, 2015			January 31, 2015			December 31, 2014
	(Dollars In Thousands)			(Dollars In Thousands)
Balance, beginning of period	$	137,593		$	193,244		$	105,881
Additions for tax positions of the current year	26,257			(5,010		)	57,463
Additions for tax positions of prior years	—			7,724			39,433
Reductions of tax positions of prior years:
Changes in judgment	(1,028		)	(58,365		)	(9,533		)
Settlements during the period	—			—			—
Lapses of applicable statute of limitations	—			—			—
Balance, end of period	$	162,822		$	137,593		$	193,244

The Company believes that it is possible that in the next 12 months approximately $18.5 million of these unrecognized tax benefits will be reduced due to the expected closure of the aforementioned Appeals process. The decrease in the amount from what was previously reported is due to the execution of an extension of the statute of limitations. In general, this closure would represent the Company’s possible successful negotiation of certain issues, coupled with its payment of the assessed taxes on the remaining issues. During the period of February 1, 2015 to March 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and the twelve months ended December 31, 2014 (Predecessor Company), ongoing discussions with the IRS related to the examination that is in progress for tax years ending December 31, 2008 through December 31, 2011 prompted the Company to revise its measurement of unrecognized tax benefits. These revisions included increasing prior determinations of amounts accrued for earlier years as well as reducing some previously accrued amounts. These changes were almost entirely related to timing issues. Therefore, aside from the cost of interest, such changes did not result in any impact on the Company’s effective tax rate.

The Company used its estimate of its annual 2015 and 2014 income in computing its effective income tax rates for the period of February 1, 2015 to March 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the three months ended March 31, 2014 (Predecessor Company). The effective tax rates for the period of February 1, 2015 to March 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the three months ended March 31, 2014 (Predecessor Company) were 32.3%, (27.7)%, and 33.2%, respectively. The recorded tax benefit for the period of January 1, 2015 to January 31, 2015 (Predecessor Company) includes the benefit associated with the re-measurement of the unrecognized tax benefits discussed in the preceding paragraph.

In general, the Company is no longer subject to U.S. federal, state, and local income tax examinations by taxing authorities for tax years that began before 2003.

Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize all of its material deferred tax assets. The Company did not record a valuation allowance against its material deferred tax assets as of March 31, 2015 (Successor Company).