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
	June 30, 2015			December 31, 2014
	(Dollars In Thousands)			(Dollars In Thousands)
Deferred income tax assets:
Loss and credit carryforwards	$	74,720		$	516
Premium receivables and policy liabilities	—			95,298
Deferred compensation	231,732			194,223
Invested assets (other than unrealized gains)	—			63,901
Deferred policy acquisition costs	429,086			—
Premium on corporate debt	118,633			—
Net unrealized loss on investments	483,439			—
Other	23,587			—
Valuation allowance	(2,053		)	(2,206		)

	1,359,144			351,732

Deferred income tax liabilities:
Premium receivables and policy liabilities	128,645			—
VOBA and other intangibles	671,775			—
DAC and VOBA	—			1,078,533
Invested assets (other than unrealized gains)	1,626,896			—
Net unrealized gains on investments	—			799,123
Other	—			19,554

	2,427,316			1,897,210

Net deferred income tax liability	$	(1,068,172	)	$	(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
	June 30, 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	59,042			(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	$	195,607		$	137,593		$	193,244

The Company believes that it is possible that in the next 12 months approximately $142.5 million of these unrecognized tax benefits will be reduced as the Company anticipates receiving the revenue agent’s report for the examination of the 2008 through 2011 tax years. During the period of February 1, 2015 to June 30, 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 three months ended June 30, 2015 (Successor Company), the period of February 1, 2015 to June 30, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the three and six months ended June 30, 2014 (Predecessor Company). The effective tax rates for the three months ended June 30, 2015 (Successor Company), the period of February 1, 2015 to June 30, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the three and six months ended June 30, 2014 (Predecessor Company) were 34.1%, 33.2%, (27.7)%, 33.4%, and 33.3%, 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 June 30, 2015 (Successor Company).