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Federal Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Federal Income Taxes Federal Income Taxes
The federal income tax expense (benefit) on continuing operations (in millions) was as follows:

For the Years Ended December 31,
202320222021
Current$(3)$3 $12 
Deferred(393)364 853 
Federal income tax expense (benefit)$(396)$367 $865 

A reconciliation of the effective tax rate differences (in millions) was as follows:

For the Years Ended December 31,
202320222021
Income (loss) before taxes$(1,148)$1,725 $4,643 
Federal statutory rate21 %21 %21 %
Federal income tax expense (benefit) at federal statutory rate(241)362 975 
Effect of:
Tax-preferred investment income (1)
(126)(90)(88)
Tax credits(40)(42)(26)
Excess tax expense (benefit) from stock-based
compensation4 (1)– 
Goodwill impairment– 133 – 
Other items7 5 4 
Federal income tax expense (benefit)$(396)$367 $865 
Effective tax rate34 %21 %19 %

(1) Relates primarily to separate account dividends eligible for the dividends-received deduction.
 
The federal income tax asset (liability) (in millions) was as follows:

As of December 31,
20232022
Current$112 $83 
Deferred929 1,313 
Total federal income tax asset (liability)$1,041 $1,396 

Significant components of our deferred tax assets and liabilities (in millions) were as follows:

As of December 31,
20232022
Deferred Tax Assets
Insurance liabilities and reinsurance-related balances$1,900 $410 
Reinsurance-related embedded derivative liabilities116 – 
Compensation and benefit plans184 172 
Intangibles18 21 
Net unrealized loss on fixed maturity AFS securities1,826 2,265 
Net unrealized loss on trading securities33 70 
Investment activity– 273 
Tax credits131 101 
Net operating losses87 278 
Capital losses93 – 
Deferred gain on reinsurance– 57 
Total deferred tax assets$4,388 $3,647 
Deferred Tax Liabilities
DAC and VOBA$1,744 $1,742 
Investment activity617 – 
Deferred loss on reinsurance465 – 
Reinsurance-related embedded derivative assets– 87 
MRB-related activity429 134 
Other204 371 
Total deferred tax liabilities$3,459 $2,334 
Net deferred tax asset (liability)$929 $1,313 

As of December 31, 2023, we have $131 million of federal income tax credits that can be carried forward to 2030 through 2033. As of December 31, 2023, we have $414 million of net operating losses to carry forward to future years. As of December 31, 2023, we have $442 million of capital losses to carry forward to future years. The net operating losses arose in tax years 2018 and 2021 and, under the Tax Cuts and Jobs Act changes, have an unlimited carryforward period. The capital losses arose in tax year 2023 and can be carried back three years and forward five years. As a result, management believes that it is more likely than not that the deferred tax asset associated with the loss carryforwards will be realized. Inclusive of the tax attribute for the net operating losses, although realization is not assured, management believes that it is more likely than not that we will realize the benefits of all our deferred tax assets, and, accordingly, no valuation allowance has been recorded.

We are subject to examination by U.S. federal, state, local and non-U.S. income authorities. With few exceptions for limited scope review, we are no longer subject to U.S. federal examinations for years before 2019. In the first quarter of 2021, the Internal Revenue Service commenced an examination of our 2014, 2015, 2016 and 2017 refund claims. We are currently under examination by several state and local taxing jurisdictions; however, we do not expect these examinations will materially impact us.
A reconciliation of the gross unrecognized federal tax benefits (in millions) was as follows:

For the Years Ended December 31,
20232022
Balance as of beginning-of-year$68 $73 
Decreases for prior year tax positions(6)(6)
Increases for prior year tax positions25 1 
Settlements for prior year tax positions– – 
Balance as of end-of-year$87 $68 

As of December 31, 2023 and 2022, $75 million and $49 million, respectively, of our gross unrecognized federal tax benefits presented above, if recognized, would have affected our federal income tax expense (benefit) and our effective tax rate. We anticipate that it is reasonably possible that unrecognized tax benefits primarily associated with separate account dividends-received deduction, tax credits and compensation, upon completion of our ongoing refund claims review, will decrease by $43 million by the end of 2024.

We recognize interest and penalties accrued, if any, related to unrecognized tax benefits as a component of tax expense. For the years ended December 31, 2023, 2022 and 2021, we recognized no interest and penalty expense (benefit), and there was no accrued interest and penalty expense related to the unrecognized tax benefits as of December 31, 2023 and 2022.

In August 2022, the Inflation Reduction Act of 2022 was passed by the U.S. Congress and signed into law by President Biden. The Inflation Reduction Act of 2022 established a new 15% corporate alternative minimum tax for corporations whose average adjusted net income for any consecutive three-year period beginning after December 31, 2022, exceeds $1.0 billion. The Inflation Reduction Act of 2022 also established a 1% excise tax on stock repurchases made by publicly traded corporations. Both provisions became effective for tax years beginning after December 31, 2022. We determined that we were not within the scope of the corporate alternative minimum tax for 2023.