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Income Tax
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Tax Disclosure
Total income tax expense (benefit) is allocated as follows:

Year Ended December 31
202120202019
(in millions of dollars)
Net Income$238.8 $171.0 $281.8 
Stockholders' Equity - Accumulated Other Comprehensive Income (Loss)
Change in Net Unrealized Gain on Securities Before Adjustment(346.9)250.2 757.0 
Change in Adjustment to Deferred Acquisition Costs and Reserves for Future Policy and Contract Benefits, Net of Reinsurance 316.8 (138.2)(511.7)
Change in Net Gain on Hedges(9.8)(23.8)(17.0)
Change in Foreign Currency Translation Adjustment4.2 (4.3)0.2 
Change in Unrecognized Pension and Postretirement Benefit Costs42.1 (34.8)(9.3)
Total$245.2 $220.1 $501.0 

A reconciliation of the income tax provision at the U.S. federal statutory rate to the income tax rate as reported in our consolidated statements of income is as follows:

Year Ended December 31
202120202019
Statutory Income Tax21.0 %21.0 %21.0 %
Net Operating Loss Carryback(0.7)(3.8)— 
Tax Exempt Income(1.1)(0.8)(0.5)
Tax Credits(0.9)(1.3)(1.1)
Policyholder Reserves2.4 0.7 — 
Other Items, Net1.8 1.9 1.0 
Effective Tax22.5 %17.7 %20.4 %
Our net deferred tax liability consists of the following.

December 31
20212020
(in millions of dollars)
Deferred Tax Asset
   Reserves$889.7 $1,279.6 
   Employee Benefits176.6 218.7 
   Other57.5 52.9 
Gross Deferred Tax Asset1,123.8 1,551.2 
   Less: Valuation Allowance12.7 14.5 
Net Deferred Tax Asset1,111.1 1,536.7 
Deferred Tax Liability
   Deferred Acquisition Costs134.9 185.5 
   Fixed Assets 71.1 74.7 
   Invested Assets1,144.9 1,443.5 
   Cost of Reinsurance171.6 180.4 
   Other47.0 68.7 
Gross Deferred Tax Liability1,569.5 1,952.8 
Net Deferred Tax Liability$458.4 $416.1 
Our consolidated statements of income include amounts subject to both domestic and foreign taxation. The income and related tax expense (benefit) are as follows:

Year Ended December 31
202120202019
(in millions of dollars)
Income Before Tax
   Domestic$957.0 $924.7 $1,289.5 
   Foreign106.0 39.3 92.6 
   Total$1,063.0 $964.0 $1,382.1 
Current Tax Expense (Benefit)
   Federal$180.7 $(98.4)$273.6 
   State and Local2.6 1.5 1.3 
   Foreign29.5 (19.7)(0.1)
   Total212.8 (116.6)274.8 
Deferred Tax Expense (Benefit)
   Federal13.3 250.5 (9.5)
   State and Local(2.2)1.0 (0.1)
   Foreign14.9 36.1 16.6 
   Total26.0 287.6 7.0 
Total Tax Expense$238.8 $171.0 $281.8 

On June 10, 2021, the Finance Act 2021 was enacted, resulting in a U.K. tax increase from 19 percent to 25 percent, effective April 1, 2023, which resulted in $24.2 million of additional tax expense in operating earnings for the revaluation of our deferred tax assets and liabilities in 2021. On July 22, 2020, the Finance Act 2020 was enacted, resulting in a U.K. tax rate increase from 17 percent to 19 percent, retroactively effective April 1, 2020, which resulted in tax expense of $9.3 million of additional tax expense for the revaluation of our deferred tax assets and liabilities in 2020. In addition, we recorded a tax benefit of $36.5 million in 2020 for tax losses that were carried back to a tax year in which the US statutory tax rate was 35 percent pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

As of December 31, 2021, our plans for the future repatriations of cash from our foreign subsidiaries can include no more than the amount of capital above that which is required by U.K. regulatory capital requirements. The remainder of our investment in our foreign subsidiaries is indefinitely reinvested and we have not recorded any deferred taxes on the approximately $0.6 billion of the excess of the U.S. GAAP carrying values over the tax basis of investments in our foreign subsidiaries.
Our consolidated statements of income include the following changes in unrecognized tax benefits.

December 31
202120202019
(in millions of dollars)
Balance at Beginning of Year$219.7 $241.0 $262.2 
Increases (Decreases) for Tax Positions Related to Prior Years(20.9)(21.0)(21.1)
Lapse of the Applicable Statute of Limitations— (0.3)(0.1)
Balance at End of Year198.8 219.7 241.0 
Less Tax Attributable to Temporary Items Included Above(84.7)(105.9)(127.1)
Total Unrecognized Tax Benefits That if Recognized Would Affect the Effective Tax Rate$114.1 $113.8 $113.9 

In 2018, we recorded $261.1 million gross unrecognized tax benefits for a policyholder reserves position taken on our 2017 federal tax return, which if recognized, would decrease our tax expense by $112.9 million. The balances of unrecognized tax benefits for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility are $84.7 million at December 31, 2021, $105.9 million at December 31, 2020, and $127.1 million at December 31, 2019. It is reasonably possible that this item could reverse in the next 12 months following review by the IRS. We recognize interest expense and penalties, if applicable, related to unrecognized tax benefits in tax expense. We recognized $5.5 million,$7.8 million, and $12.8 million of interest expense related to unrecognized tax benefits during 2021, 2020 and 2019, respectively. The liability for net interest expense on uncertain tax positions was approximately $26.2 million, $20.6 million, and $12.8 million as of December 31, 2021, 2020 and 2019, respectively.

We file federal and state income tax returns in the United States and in foreign jurisdictions. Tax year 2015 and tax years subsequent to 2016 remain subject to examination by the IRS. Tax years subsequent to 2017 for the subsidiaries not included in the consolidated tax return remain subject to examination by the IRS. All other major foreign jurisdictions remain subject to examination for tax years subsequent to 2019 with the exception of Poland for which tax years subsequent to 2015 remain subject to examination. We believe sufficient provision has been made for all potential adjustments for years that are not closed by the statute of limitations in all major tax jurisdictions and that any such adjustments would not have a material adverse effect on our financial position, liquidity, or results of operations.

We file state income tax returns in nearly every state in the United States. Tax year 2015 and tax years subsequent to 2016 remain subject to examination depending on the statute of limitation established by the various states, which is generally three to four years.

We have federal net operating losses that can be carried forward indefinitely of $113.2 million as of December 31, 2021. Our federal capital loss carryforward, related to subsidiaries not included in the consolidated U.S. federal return, was $0.6 million at December 31, 2021 and is expected to be utilized by the time it expires in 2022. We have net operating loss carryforwards for state and local income tax of approximately $182.2 million, most of which is expected to expire unused between 2022 and 2041.

We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized.  Our valuation allowance was $12.7 million and $14.5 million at December 31, 2021 and 2020, the majority of which related to our cumulative deferred state income tax benefits. The de minimis remaining amount of our valuation allowance relates to unrealized tax losses on buildings which we own and occupy in the U.K. We recorded a decrease in our valuation allowance of $1.8 million during 2021 and a decrease of $13.8 million in 2020, primarily in other comprehensive income.

Total income taxes refunded during 2021 was $51.0 million. Total income taxes paid during 2020 and 2019 were $200.0 million, and $35.1 million, respectively.