Income Taxes (Tables)

9 Months Ended

Sep. 30, 2017

The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:



Jurisdiction	Tax Year
United States	2010
New York State	2013
New York City	2013
United Kingdom	2014
Italy	2013

Significant Portions of Deferred Tax Liabilities and Deferred Tax Assets

The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at September 30, 2017 and December 31, 2016 are presented below:



	September 30, 2017			December 31, 2016
Deferred tax liabilities:
Insurance intangible	$	307,290		$	336,728
Variable interest entities	42,232			46,343
Investments	91,231			38,656
Unearned premiums and credit fees	64,807			68,682
Unremitted foreign earnings	74,459			30,699
Other	4,173			4,276
Total deferred tax liabilities	584,192			525,384
Deferred tax assets:
Net operating loss and capital carryforward	1,490,682			1,409,565
Loss reserves	269,597			224,553
AMT Credits	31,532			31,532
Compensation	4,967			4,759
Other	8,878			11,967
Subtotal deferred tax assets	1,805,656			1,682,376
Valuation allowance	1,223,394			1,158,712
Total deferred tax assets	582,262			523,664
Net deferred tax (liability)	$	(1,930	)	$	(1,720	)

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

U.S. and foreign components of pre-tax income were as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
U.S.	$	(211,769	)	$	45,238	$	(428,264	)	$	171,137
Foreign	26,303			71,482		150,930			19,948
Total	$	(185,466	)	$	116,720	$	(277,334	)	$	191,085

Schedule of Components of Income Tax Expense (Benefit)

The components of the provision for income taxes were as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Current taxes
U. S. federal	$	(617	)	$	2,635	$	—	$	2,711
U.S. state and local	—			191		—		428
Foreign	6,056			12,456		31,902		18,852
Current taxes	5,439			15,282		31,902		21,991
Deferred taxes
Deferred taxes	—			—		—		(114		)
Provision for income taxes	$	5,439		$	15,282	$	31,902	$	21,877

Schedule of Net Operating Loss And Tax Credit Carryovers

Pursuant to the Amended TSA (as defined in Note 1. Background and Business Description to the Consolidated Financial Statements included in Part II, Item 8 in the Company's Annual Report on Form 10-K for the year ended December 31, 2016), to the extent Ambac Assurance generates taxable income after September 30, 2011, which is offset with "Allocated NOLs" of $3,650,000, it is obligated to make payments (“Tolling Payments”), subject to certain credits, to Ambac in accordance with the following NOL usage table, where the “Applicable Percentage” is applied to the aggregate amount of federal income tax liability that would have been paid if the Allocated NOLs were not available. Pursuant to the Closing Agreement between Ambac and the Internal Revenue Service ("IRS"), the IRS will receive 12.5% of Tier C and 17.5% of Tier D payments, if made.

NOL Usage Table



NOL Usage Tier	Allocated NOLs			Applicable Percentage
A	The first	$479,000		15%
B	The next	$1,057,000	after Tier A	40%
C	The next	$1,057,000	after Tier B	10%
D	The next	$1,057,000	after Tier C	15%