Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense (benefit) consisted of the following for the periods indicated:

	Year Ended December 31,
	2021		2020		2019
Current tax expense (benefit):
Federal	$	(45)	$	6	$	9
Total current tax expense (benefit)	(45)		6		9
Deferred tax expense (benefit):
Federal	208		(20)		23
Total deferred tax expense (benefit)	208		(20)		23
Total income tax expense (benefit)	$	163	$	(14)	$	32

Income taxes were different from the amount computed by applying the federal income tax rate to Income (loss) before income taxes for the following reasons for the periods indicated:

	Year Ended December 31,
	2021			2020			2019
Income (loss) before income taxes	$	989		$	152		$	332
Tax rate	21.0		%	21.0		%	21.0		%
Income tax expense (benefit) at federal statutory rate	208			32			70
Tax effect of:
Dividends received deduction	(33)			(37)			(35)
Tax attributes	(11)			(8)			(4)
Other	(1)			(1)			1
Income tax expense (benefit)	$	163		$	(14)		$	32
Effective tax rate	16.5		%	(9.2)		%	9.6		%

Temporary Differences

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of the dates indicated, are presented below.

	December 31,
	2021		2020
Deferred tax assets
Insurance reserves	$	—	$	112
Investments	57		9
Compensation and benefits	63		60
Loss carryforwards	211		—
Other assets	—		35
Total gross assets	331		216
Deferred tax liabilities
Net unrealized investment (gains) losses	(463)		(645)
Insurance reserves	(23)		—
Deferred policy acquisition costs	(71)		(10)
Other liabilities	(1)		—
Total gross liabilities	(558)		(655)
Net deferred income tax asset (liability)	$	(227)	$	(439)

Due to the Individual Life Transaction, $1,668 of federal net operating loss ("NOL") carryforwards were contributed to VRIAC in 2021. The following table sets forth the NOLs as of the dates indicated.

	December 31,
	2021			2020
Federal net operating loss carryforward	$	1,006	(1)	$	—

(1) NOL not subject to expiration.

Valuation allowances are provided when it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2021 and 2020, the Company had no valuation allowance. However, the application of intra-period tax allocation rules to benefits associated with capital deferred tax assets resulted in a valuation allowance as of December 31, 2021 and 2020 of $128 and $128, respectively, in continuing operations, offset by a corresponding benefit in Other comprehensive income.

Tax Sharing Agreement

As of December 31, 2021 and 2020, the Company had a (payable)/receivable from Voya Financial of $(42) and $5, respectively, for federal income taxes under the intercompany tax sharing agreement.

The results of the Company's operations are included in the consolidated tax return of Voya Financial. Generally, the Company's consolidated financial statements recognize the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods pursuant to the provisions of Income Taxes (ASC 740) as if the Company were a separate taxpayer rather than a member of Voya Financial's consolidated income tax return group with the exception of any net operating loss carryforwards and capital loss carryforwards, which are recorded pursuant to the tax sharing agreement. If the Company instead were to follow a separate taxpayer approach without any exceptions, there would be no impact to income tax expense (benefit) for the periods indicated above. However, any current tax benefit related to the Company's tax attributes realized by virtue of its inclusion in the consolidated tax return of Voya Financial would have been

recorded directly to equity rather than income. Under the tax sharing agreement, Voya Financial will pay the Company for the tax benefits of ordinary and capital losses only in the event that the consolidated tax group actually uses the tax benefit of losses generated.

Unrecognized Tax Benefits

The Company had no unrecognized tax benefits as of December 31, 2021 and December 31, 2020.

Interest and Penalties

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in current income taxes and Income tax expense on the Consolidated Balance Sheets and the Consolidated Statements of Operations, respectively. The Company had no accrued interest as of December 31, 2021 and December 31, 2020.

Tax Regulatory Matters

For the tax years 2019 through 2021, the Company participated in the Internal Revenue Service ("IRS") Compliance Assurance Process ("CAP"), which is a continuous audit program provided by the IRS. For the 2019 and 2020 tax years, the Company was in the Compliance Maintenance Bridge ("Bridge") phase of CAP. In the Bridge phase, the IRS did conduct any review or provide any letters of assurance for those tax years.