XML 39 R17.htm IDEA: XBRL DOCUMENT v3.22.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Provision for Income Taxes
 Successor CompanyPredecessor Company
For the Period of July 1, 2021 to December 31, 2021For the Six Months Ended June 30, 2021For the Years Ended December 31,
Income Tax Expense (Benefit)20202019
Current - U.S. Federal$(86)$— $10 $(8)
Deferred - U.S. Federal137 30 56 52 
 Total income tax expense$51 $30 $66 $44 
Deferred tax assets and liabilities on the consolidated balance sheets represent the tax consequences of differences between the financial reporting and tax basis of assets and liabilities.
Components of Deferred Tax Assets (Liabilities)
Successor CompanyPredecessor Company
December 31, 2021December 31, 2020
Deferred Tax Assets
Tax basis deferred policy acquisition costs$110 $79 
VOBA and reserves716 567 
Net operating loss carryover25 102 
Employee benefits7 7 
Foreign tax credit carryover16 18 
Net unrealized loss on investments4 — 
Deferred reinsurance gain187 198 
Other— 12 
 Total deferred tax assets1,065 983 
Deferred Tax Liabilities
Investment related items(449)(145)
Net unrealized gains on investments— (360)
Other(13)— 
 Total deferred tax liabilities(462)(505)
 Net deferred tax asset$603 $478 
The statute of limitations is closed through the 2017 tax year with the exception of net operating loss ("NOL") carryforwards utilized in open tax years. Management believes that adequate provision has been made on the consolidated financial statements for any potential adjustments that may result from tax examinations and other tax-related matters for all open tax years. For periods ended December 31, 2021 (Successor Company) and 2020 (Predecessor Company), the Company had no reserves for uncertain tax positions. As of December 31, 2021 (Successor Company) and 2020 (Predecessor Company), there was no unrecognized tax benefit that if recognized would affect the effective tax rate and that had a reasonable possibility of significantly increasing or decreasing within the next 12 months.
The Company classifies interest and penalties (if applicable) as income tax expense on the consolidated financial statements. The Company recognized no interest expense for the period July 1, 2021 to December 31, 2021 (Successor Company), the six months ended June 30, 2021 (Predecessor Company) and the years ended December 31, 2020 and 2019 (Predecessor Company). The Company had no interest payable as of December 31, 2021 (Successor Company) and 2020 (Predecessor Company). The Company does not believe it would be subject to any penalties in any open tax years and, therefore, has not recorded any accrual for penalties.
The Company believes it is more likely than not that all deferred tax assets will be fully realized. In assessing the need for a valuation allowance, management considered future taxable temporary difference reversals, future taxable income exclusive of reversing temporary differences and carryovers, taxable income in open carry back years and other tax planning strategies. From time to time, tax planning strategies could include holding a portion of debt securities with market value losses until recovery, making investments which have specific tax characteristics and business considerations such as asset-liability matching.
Net deferred income taxes include the future tax benefits associated with the net operating loss carryover and foreign tax credit carryover as follows:
Net Operating Loss Carryover
As of December 31, 2021 (Successor Company) and 2020 (Predecessor Company), the net deferred tax asset included the expected tax benefit attributable to net operating losses of $117 and $484, respectively. The totals include U.S. losses that were generated prior to 2017 of $0 and $121, respectively. These losses are subject to limits on the period for which they can be carried forward. If not utilized, these losses will expire from 2028-2030. Utilization of these loss carryovers is dependent upon the generation of sufficient future taxable income. The totals also include U.S. losses that were generated in 2018 of $117 and $363, respectively, primarily due to the Commonwealth Annuity Reinsurance Agreement. These losses do not expire, but their utilization in any carryforward year is limited to 80% of taxable income in that year. The loss carryforwards are also subject to Internal Revenue Code Section 382, which may limit the amount that can be utilized in any carryforward year.
Given the Company's expected future earnings, the Company believes sufficient taxable income will be generated in the future to utilize its net operating loss carryover. Although the Company believes there will be sufficient future taxable income to fully recover the remainder of the loss carryover, the Company's estimate of the likely realization may change over time.
Foreign Tax Credit Carryover
As of December 31, 2021 (Successor Company) and 2020 (Predecessor Company), the net deferred tax asset included the expected tax benefit attributable to foreign tax credit carryovers of $16 and $18 respectively.
A reconciliation of the tax provision at the U.S. Federal statutory rate to the provision (benefit) for income taxes is as follows.
Income Tax Rate Reconciliation
 Successor CompanyPredecessor Company
For the Period of July 1, 2021 to December 31, 2021For the Six Months Ended June 30, 2021For the Years Ended December 31,
 20202019
Tax provision at U.S. Federal statutory rate$70 $45 $98 $86 
Dividends received deduction ("DRD")(16)(14)(28)(34)
Foreign related investments(2)(1)(4)(7)
Other(1)— — (1)
Provision for income taxes$51 $30 $66 $44 
The separate account DRD is estimated for the current year using information from the most recent return, adjusted for current year equity market performance and other appropriate factors, including estimated levels of corporate dividend payments and level of policy owner equity account balances. The actual current year DRD can vary from estimates based on, but not limited to, changes in eligible dividends received in the mutual funds, amounts of distributions from these mutual funds and the Company’s taxable income before the DRD. The Company evaluates its DRD computations on a quarterly basis.