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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
16. INCOME TAXES
The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:
JurisdictionTax Year
United States2010
New York State2013
New York City2017
United Kingdom2018
Italy2017
Consolidated Pretax Income (Loss)
U.S. and foreign components of pre-tax income (loss) were as follows:
Year Ended
December 31,
202120202019
U.S.$(32)$(441)$(174)
Foreign34 1 (9)
Total$2 $(440)$(183)
Provision (Benefit) for Income Taxes
The components of the provision (benefit) for income taxes were as follows:
Year Ended
December 31,
202120202019
Current taxes
U.S. state and local
$2 $— $(3)
Foreign
10 8 37 
Total current taxes
12 8 34 
Deferred taxes
Foreign
6 (10)(1)
Total deferred taxes
$6 $(10)$(1)
Provision for income taxes$18 $(3)$32 
The total effect of income taxes on net income and stockholders’ equity for the years ended December 31, 2021, 2020 and 2019 is as follows:
Year Ended
December 31,
202120202019
Total income taxes charged to net income$18 $(3)$32 
Income taxes charged (credited) to stockholders’ equity:
Unrealized gains (losses) on investment securities(3)3 14 
Unrealized gains (losses) on foreign currency translations— — — 
Valuation allowance to equity1 (3)(23)
Total charged to stockholders’ equity:(2)1 (8)
Total effect of income taxes$16 $(1)$24 
Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate
The tax provisions in the accompanying Consolidated Statements of Total Comprehensive Loss reflect effective tax rates differing from prevailing Federal corporate income tax rates. The following is a reconciliation of these differences:
Year Ended December 31,202120202019
Tax on income (loss) at statutory rate$— 21 %$(92)21 %$(38)21 %
Changes in expected tax resulting from:
Tax-exempt interest(2)(114)%(2)— %(3)2 %
Foreign taxes8 448 %6 (1)%40 (22)%
State Income Taxes14 794 %— — %(2)1 %
Substantiation adjustment— — %(29)7 %28 (15)%
Valuation allowance(4)(230)%113 (26)%8 (4)%
Other, net1 72 %2 — %— — %
Tax expense on income (loss)$18 991 %$(3)1 %$32 (18)%
Unrecognized Tax Positions
The Company had no material unrecognized tax benefits at December 31, 2021 and 2020.
Deferred Income Taxes
The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at December 31, 2021 and 2020, are presented below:
December 31,20212020
Deferred tax liabilities:
Insurance intangible$67 $78 
Unearned premiums and credit fees32 32 
Investments14 22 
Variable interest entities15 13 
Other6 7 
Total deferred tax liabilities134 152 
Deferred tax assets:
Net operating loss carryforward786 764 
Loss reserves180 218 
State capital loss carryforward7 — 
Debentures7 22 
Compensation8 9 
Other4 5 
Subtotal deferred tax assets993 1,019 
Valuation allowance886 891 
Total deferred tax assets106 128 
Net deferred tax liability$28 $24 
In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient U.S. federal, state and/or local taxable income to recover the deferred tax operating assets and therefore maintains a full valuation allowance. The remaining net deferred tax liability of $28 is attributable to Ambac U.K. and is classified in other liabilities on the Consolidated Balance Sheet.
NOL Usage
Pursuant to a 2013 Closing Agreement between Ambac and the United States Internal Revenue Service ("IRS"), AAC could have to pay amount to as much as $8 to the IRS should AAC utilize NOLs available to it as of December 31, 2019.
As of December 31, 2021, the Company has $3,744 of NOLs, which if not utilized will begin expiring in 2029, and will fully expire in 2041.