Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

21. Income Taxes

U.S. TAX LAW CHANGES

On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) of 2022 (H.R. 5376), which finances climate and energy provisions and an extension of enhanced subsidies under the Affordable Care Act. Key provisions include a 15 percent corporate alternative minimum tax (CAMT) on adjusted financial statement income for corporations with average profits over $1 billion over a three-year period, a 1 percent stock buyback tax, increased IRS enforcement funding, and Medicare's new ability to negotiate prescription drug prices. CAMT and the stock buyback tax are effective for tax years beginning after December 31, 2022. The tax provisions of IRA are not expected to have a material impact on AIG’s financial results. However, the CAMT may impact our U.S. cash tax liabilities.

BASIS OF PRESENTATION

We file a consolidated U.S. federal income tax return with our eligible U.S. subsidiaries. Income earned by subsidiaries operating outside the U.S. is taxed, and income tax expense is recorded, based on applicable U.S. and foreign laws.

Following the IPO of Corebridge on September 19, 2022, AIG’s remaining ownership in Corebridge decreased below 80 percent, resulting in tax deconsolidation of Corebridge parent and its subsidiaries from the AIG consolidated U.S. federal income tax group as well as certain state and local jurisdictions where unitary returns are filed.

Subsequent to the tax deconsolidation from AIG, due to the application of relevant U.S. tax laws, American General Corporation and its directly owned life insurance subsidiaries (the AGC Group) will not be permitted to join in the filing of a consolidated U.S. federal income tax return with Corebridge parent and its non-life-insurance subsidiaries for a period of five years. Corebridge’s net operating losses and tax credit carryforwards that have not been utilized prior to tax deconsolidation from AIG will remain with the relevant Corebridge entities and will be available for utilization by the respective Corebridge U.S. federal income tax groups. The realizability of the deferred tax assets related to such carryforwards is based on the positive and negative evidence applicable to each U.S. federal income tax group.

TAX ACCOUNTING POLICIES

We use an item-by-item approach to release the stranded or disproportionate income tax effects in AOCI related to our available-for-sale securities. Under this approach, a portion of the disproportionate tax effects is assigned to each individual security lot at the date the amount becomes lodged. When the individual securities are sold, mature, or are otherwise impaired on an other-than-temporary basis, the assigned portion of the disproportionate tax effect is reclassified from AOCI to income (loss) from continuing operations.

We consider our foreign earnings with respect to certain operations in Canada, South Africa, Japan, Latin America, Bermuda as well as the European, Asia Pacific and Middle East regions to be indefinitely reinvested. These earnings relate to ongoing operations and have been reinvested in active business operations. A deferred tax liability has not been recorded for those foreign subsidiaries whose earnings are considered to be indefinitely reinvested. If recorded, such deferred tax liability would not be material to our consolidated financial condition. Deferred taxes, if necessary, have been provided on earnings of non-U.S. affiliates whose earnings are not indefinitely reinvested.

Global Intangible Low-Taxed Income (GILTI) imposes U.S. taxes on the excess of a deemed return on tangible assets of certain foreign subsidiaries. Consistent with accounting guidance, we have made an accounting policy election to treat GILTI taxes as a period tax charge in the period the tax is incurred.

EFFECTIVE TAX RATE

The following table presents income (loss) from continuing operations before income tax expense (benefit) by U.S. and foreign location in which such pre-tax income (loss) was earned or incurred:

Years Ended December 31,
(in millions)		2022		2021		2020
U.S.	$	12,432	$	9,838	$	(8,396)
Foreign		1,850		2,261		1,103
Total	$	14,282	$	12,099	$	(7,293)

The following table presents the income tax expense (benefit) attributable to pre-tax income (loss) from continuing operations:

Years Ended December 31,
(in millions)		2022		2021		2020
Foreign and U.S. components of actual income tax expense (benefit):
U.S.:
Current	$	246	$	(216)	$	(57)
Deferred		2,348		2,190		(1,676)
Foreign:
Current		271		171		274
Deferred		141		31		(1)
Total	$	3,006	$	2,176	$	(1,460)

Our actual income tax expense (benefit) differs from the statutory U.S. federal amount computed by applying the federal income tax rate due to the following:

Years Ended December 31,	2022						2021						2020
(dollars in millions)	Pre-Tax Income (Loss)		Tax Expense (Benefit)		Percent of Pre-Tax Income (Loss)		Pre-Tax Income (Loss)		Tax Expense (Benefit)		Percent of Pre-Tax Income (Loss)		Pre-Tax Income (Loss)		Tax Expense (Benefit)		Percent of Pre-Tax Income (Loss)
U.S. federal income tax at statutory rate	$	14,281	$	2,999	21.0	%	$	12,099	$	2,540	21.0	%	$	(7,288)	$	(1,531)	21.0	%
Adjustments:
Tax exempt interest			(18)		(0.1)				(18)		(0.1)				(19)		0.3
Uncertain tax positions(a)(b)			(17)		(0.1)				(9)		(0.1)				165		(2.3)
Reclassifications from AOCI			(81)		(0.6)				(109)		(0.9)				(101)		1.4
Dispositions of subsidiaries(c)			—		—				11		0.1				180		(2.5)
Non-controlling interest			(31)		(0.2)				(97)		(0.8)				(12)		0.2
Non-deductible transfer pricing charges			12		0.1				16		0.1				11		(0.2)
Dividends received deduction			(36)		(0.3)				(37)		(0.3)				(39)		0.5
Effect of foreign operations(d)			149		1.0				134		1.1				76		(1.0)
Share-based compensation payments excess tax effect			(19)		(0.1)				16		0.1				35		(0.5)
State income taxes			33		0.2				37		0.3				15		(0.2)
Expiration of tax attribute carryforwards			—		—				16		0.1				221		(3.0)
Tax audit resolution			—		—				(935)		(7.6)				(379)		5.2
Other(b)			40		0.3				(107)		(0.9)				(16)		0.2
Effect of discontinued operations			—		—				—		—				—		—
Valuation allowance:
Continuing operations			(25)		(0.2)				718		5.9				(65)		0.9
Consolidated total amounts	14,281		3,006		21.0		12,099		2,176		18.0		(7,288)		(1,459)		20.0
Amounts attributable to discontinued operations	(1)		—		—		—		—		—		5		1		20.0
Amounts attributable to continuing operations	$	14,282	$	3,006	21.0	%	$	12,099	$	2,176	18.0	%	$	(7,293)	$	(1,460)	20.0	%

(a)Refer to the Accounting for Uncertainty in Income Taxes section below for further discussion on 2021 and 2020 tax audit resolution activity.

(b)2020 includes a net charge of $67 million related to the accrual of IRS interest, of which $139 million tax expense is reported in Uncertain tax positions and $72 million tax benefit is reported in Other.

(c)2020 disposition of subsidiaries is primarily related to the tax effects of the Majority Interest Fortitude Sale.

(d)Effect of foreign operations is primarily related to income and losses in our foreign operations taxed at statutory tax rates different than 21 percent, and foreign income subject to U.S. taxation.

DEFERRED TAX ASSET

The following table presents the components of the net deferred tax assets (liabilities):

December 31,
(in millions)		2022		2021
Deferred tax assets:
Losses and tax credit carryforwards	$	6,868	$	7,291
Basis differences on investments		2,652		2,944
Fortitude Re funds withheld embedded derivative		—		543
Life policy reserves		3,697		3,751
Accruals not currently deductible, and other		389		634
Loss reserve discount		352		455
Loan loss and other reserves		62		509
Unearned premium reserve reduction		294		283
Fixed assets and intangible assets		1,081		1,262
Unrealized losses related to available for sale debt securities		5,595		—
Other		498		247
Employee benefits		382		407
Total deferred tax assets		21,870		18,326
Deferred tax liabilities:
Investments in foreign subsidiaries		(41)		(15)
Deferred policy acquisition costs		(1,868)		(2,054)
Unrealized gains related to available for sale debt securities		—		(2,791)
Fortitude Re funds withheld embedded derivative		(862)		—
Other		—		—
Total deferred tax liabilities		(2,771)		(4,860)
Net deferred tax assets before valuation allowance		19,099		13,466
Valuation allowance		(4,250)		(1,987)
Net deferred tax assets (liabilities)	$	14,849	$	11,479

The following table presents AIG's U.S. consolidated federal income tax group tax losses and credits carryforwards.

December 31, 2022			Tax		Carryforward Period Ending Tax Year(b)												Unlimited Carryforward Period and Carryforward Periods(b)
(in millions)	Gross		Effected		2023		2024		2025		2026		2027		2028		2029 - After
Net operating loss carryforwards	$	24,804	$	5,209	$	—	$	—	$	—	$	—	$	—	$	3,253	$	1,956
Capital loss carryforwards	$	—	—		—		—		—		—		—		—		—
Foreign tax credit carryforwards			22		22		—		—		—		—		—		—
Other carryforwards			—		—		—		—		—		—		—		—
Total AIG U.S. consolidated federal income tax group tax losses and credits carryforwards on a U.S. GAAP basis(a)			$	5,231	$	22	$	—	$	—	$	—	$	—	$	3,253	$	1,956

(a)Financial reporting basis reflects the impact of unrecognized tax benefits for tax years in which tax attributes can be realized through carryback upon settlement.

(b)Carryforward periods are based on U.S. tax laws governing utilization of tax attributes. Expiration periods are based on the year the carryforward was generated.

ASSESSMENT OF DEFERRED TAX ASSET VALUATION ALLOWANCE

The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed.

Recent events, including changes in target interest rates by the Board of Governors of the Federal Reserve System, and significant market volatility, continue to impact actual and projected results of our business operations as well as our views on potential effectiveness of certain prudent and feasible tax planning strategies. In order to demonstrate the predictability and sufficiency of future taxable income necessary to support the realizability of the net operating losses and foreign tax credit carryforwards, we have considered forecasts of future income for each of our businesses, including assumptions about future macro-economic and AIG-specific conditions and events, and any impact these conditions and events may have on our prudent and feasible tax planning

strategies. We also subjected the forecasts to a variety of stresses of key assumptions and evaluated the effect on tax attribute utilization.

The carryforward period of our foreign tax credit carryforwards runs through 2023. Carryforward periods for our net operating losses extend from 2028 forward. However, utilization of a portion of our net operating losses is limited under separate return limitation year rules.

Although tax deconsolidation of Corebridge from the AIG consolidated U.S. federal income tax group resulted in the formation of new federal tax filing groups requiring separate deferred tax asset realizability assessments, there was no material change to the total deferred tax asset valuation allowance recorded as of December 31, 2022. After factoring in multiple data points and assessing relative weight of all positive and negative evidence, we concluded that a valuation allowance of $864 million is necessary. Accordingly, as of December 31, 2022, the balance sheet reflects a valuation allowance of $864 million, of which $713 million relates to AIG's U.S. federal consolidated income tax group and $151 million relates to Corebridge. The valuation allowance recorded with respect to AIG's U.S. federal consolidated income tax group relates to a portion of tax attribute carryforwards that are no longer more-likely-than-not to be realized. The valuation allowance at Corebridge relates to a portion of both tax attribute carryforwards and certain other deferred tax assets of the Corebridge non-life insurance group that are not more-likely-than-not to be realized.

For the year ended December 31, 2022, recent changes in market conditions, including rising interest rates, impacted the unrealized tax gains and losses in the available for sale securities portfolios of both our U.S. Life Insurance and non-life insurance companies, resulting in deferred tax assets related to net unrealized tax capital losses. The deferred tax assets relate to the unrealized tax capital losses for which the carryforward period has not yet begun, and as such, when assessing recoverability, we consider our ability and intent to hold the underlying securities to recovery. As of December 31, 2022, based on all available evidence, we concluded that a valuation allowance should be established on a portion of the deferred tax assets related to unrealized tax capital losses that are not more-likely-than-not to be realized. For the year ended December 31, 2022, we established $1.4 billion of valuation allowance associated with the unrealized tax capital losses in the U.S. Life Insurance Companies’ available for sale securities portfolio and $905 million of valuation allowance associated with the unrealized tax capital losses in the non-life insurance companies’ available for sale securities portfolio.

For the year ended December 31, 2022, we recognized a net $31 million decrease in deferred tax asset valuation allowance associated with certain foreign and state jurisdictions, primarily attributable to current year activity.

The following table presents the net deferred tax assets (liabilities) at December 31, 2022 and 2021 on a U.S. GAAP basis:

December 31,
(in millions)		2022		2021
Net U.S. deferred tax assets	$	12,094	$	14,656
Net deferred tax assets (liabilities) in AOCI		4,958		(2,772)
Valuation allowance		(3,128)		(859)
Subtotal		13,924		11,025
Net foreign, state and local deferred tax assets		2,342		1,817
Valuation allowance		(1,122)		(1,128)
Subtotal		1,220		689
Subtotal - Net U.S., foreign, state and local deferred tax assets		15,144		11,714
Net foreign, state and local deferred tax liabilities		(295)		(235)
Total AIG net deferred tax assets (liabilities)	$	14,849	$	11,479

TAX EXAMINATIONS AND LITIGATION

We are currently under examination by the IRS for the tax years 2011 through 2019.

In September 2020, we received the IRS Revenue Agent Report containing agreed and disagreed issues for the audit of tax years 2007-2010. In October 2020, we filed a protest of the disagreed issues with the IRS Independent Office of Appeals (IRS Appeals). In March 2021, the IRS audit team issued their rebuttal to the protest of disagreed issues to IRS Appeals. We had an IRS Appeals conference in October 2021 and are continuing to engage in the Appeals process.

In 2009, after paying amounts due on a statutory notice of deficiency related to the disallowance of foreign tax credits associated with cross border financing transactions, we filed a refund lawsuit in the Southern District of New York (Southern District) with respect to tax year 1997. In 2020, the parties executed a binding settlement agreement with respect to the underlying issues in the lawsuit. On October 22, 2020, the Southern District dismissed the case based upon the settlement reached between AIG and the government. In March 2022, interest amounts due on the settlement of items challenged by the IRS during the audit of AIG's 2006 and prior years were agreed to between AIG and the IRS, thus concluding this matter.

ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES

The following table presents a reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits, excluding interest and penalties:

Years Ended December 31,
(in millions)		2022		2021		2020
Gross unrecognized tax benefits, beginning of year	$	1,157	$	2,343	$	4,762
Increases in tax positions for prior years		29		22		45
Decreases in tax positions for prior years		(33)		(1,233)		(131)
Increases in tax positions for current year		59		37		13
Lapse in statute of limitations		(21)		—		—
Settlements		—		(12)		(2,346)
Gross unrecognized tax benefits, end of year	$	1,191	$	1,157	$	2,343

There was no significant activity in unrecognized tax benefits for the year ended December 31, 2022. The activity in unrecognized tax benefits for the year ended December 31, 2021 is primarily attributable to effective settlement of reserves for uncertain tax positions due to the completion of audit activity by the IRS and New York State. The activity for the year ended December 31, 2020 includes the impact of the binding settlement agreement with the IRS for tax years 1991-2006 with respect to cross border financing transactions. After remeasurement based on the settlement terms, the remaining balances of the unrecognized tax benefits, penalties and interest related to the 1991-2006 tax years are no longer presented as uncertain tax positions and were reclassified as prior year current tax payable.

At December 31, 2022 and 2021 and 2020, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $1.2 billion, $1.1 billion and $2.3 billion, respectively. Unrecognized tax benefits that would not affect the effective tax rate generally relate to such factors as the timing, rather than the permissibility of the deduction.

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At December 31, 2022, 2021 and 2020, we had accrued liabilities of $63 million, $69 million and $286 million, respectively for the payment of interest (net of the federal benefit) and penalties. For the years ended December 31, 2022, 2021, and 2020, we accrued expense (benefit) of $(2) million, $(207) million, and $128 million, respectively, for the payment of interest and penalties. The activity in 2022 was due to the completion of audit activity and expiration of a certain statute related to foreign operations. The activity in 2021 was primarily related to the completion of audit activity by the IRS and New York State. The activity in 2020 was primarily attributable to decreases and settlements of interest and penalties associated with the completion of the IRS examination for tax years 1991-2006.

Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our consolidated financial condition.

Listed below are the tax years that remain subject to examination by major tax jurisdictions:

At December 31, 2022	Open Tax Years
Major Tax Jurisdiction
United States	2007-2021
Australia	2018-2021
Canada	2018-2021
France	2019-2021
Japan	2016-2021
Korea	2014-2021
Singapore	2018-2021
United Kingdom	2021-2021