Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

The components of income tax expense (benefit) for continuing operations were as follows:

	Year Ended December 31,
Total Income Tax Expense (Benefit) on continuing operations	2021		2020		2019
Current Income Taxes
Federal	$	7	$	(3)	$	19
State	113		92		74
Total current income taxes	120		89		93
Deferred Income Taxes
Federal	376		87		(303)
State	(25)		(83)		(68)
Total deferred income taxes	351		4		(371)
Total income tax expense (benefit)	$	471	$	93	$	(278)

The provision for income taxes does not reflect the tax effects of the sale of the Company’s reverse servicing portfolio reported as discontinued operations.

The following table presents a reconciliation of the income tax provision computed at the U.S. federal statutory tax rate to the actual effective tax rate:

	Year Ended December 31,
Reconciliation of the Income Tax Provision	2021				2020				2019
Tax Expense (Benefit) at Federal Statutory Rate	$	407	21.0	%	$	84	21.0	%	$	(5)	21.0	%
Effect of:
State taxes, net of federal benefit	70		3.6	%	8		1.7	%	3		(17.5)	%
Non-controlling interests	—		—	%	—		—	%	1		(3.1)	%
Change in valuation allowance	—		—	%	—		—	%	(285)		1,172.8	%
Deferred adjustments	(6)		(0.3)	%	(5)		(1.1)	%	2		(9.3)	%
Nondeductible items	2		0.1	%	7		1.7	%	5		(19.9)	%
Other, net	(2)		(0.1)	%	(1)		(0.3)	%	1		(0.8)	%
Total income tax expense (benefit)	$	471	24.3	%	$	93	23.0	%	$	(278)	1,143.2	%

In 2021 and 2020, the effective tax rate differed from the statutory tax rate primarily due to state tax adjustments and permanent differences such as nondeductible executive compensation and nondeductible penalties. In 2019, the effective tax rate differed from the statutory tax rate primarily due to the release of the valuation allowance associated with the net operating loss (“NOL”) carryforwards of WMIH and state tax adjustments.

The Company has federal NOL carryforwards (pre-tax) of approximately $0.6 billion and $2.6 billion as of December 31, 2021 and 2020, respectively.

In the assessment of whether a valuation allowance was required as of December 31, 2021, the Company considered the four sources of taxable income under ASC 740-10-30-18 including the future reversals of existing taxable temporary differences and identified tax planning strategies that were considered prudent and feasible.

Consistent with the prior year analysis, the Company based its projection of future taxable income on historical pre-tax income and assumed a steady state of operations that would generate cash flows and liquidity sufficient to maintain current operations. The Company considered other factors in its determination of future taxable income that was demonstrated by historical performance.

As a result, the Company still believes it is more likely than not that its deferred tax assets will be realized prior to their expiration except for certain federal 382 limited NOLs that begin to expire with the 2026 tax year, if unused, and immaterial state NOL carryforwards that begin to expire with the 2021 tax year, if unused. Accordingly, the Company has recorded a federal and state valuation allowance of $7 and $2, respectively, as of December 31, 2021 and 2020 related to these NOL carryforwards. The Company does not expect any future tax loss limitations under Sections 382 and 384 that would impact its utilization of remaining federal NOL carryforwards.

Temporary differences and carryforwards that give rise to deferred tax assets and liabilities are comprised of the following:

Deferred Tax Assets and Liabilities	December 31, 2021		December 31, 2020
Deferred Tax Assets
Effect of:
Goodwill and intangible assets	$	998	$	728
Loss carryforwards (federal, state & capital)	134		558
Loss reserves	104		115
Lease liability	30		26
Accruals	16		24
Other, net	20		52
Total deferred tax assets	1,302		1,503
Deferred Tax Liabilities
MSR amortization and mark-to-market, net	(240)		(117)
Right-of-use assets	(27)		(23)
Depreciation and amortization, net	(19)		(13)
Prepaid assets	(2)		(2)
Other, net	(14)		—
Total deferred tax liabilities	(302)		(155)
Valuation allowance	(9)		(9)
Deferred tax assets, net	$	991	$	1,339

The Company elected to account for the Global Intangible Low-Taxed Income (“GILTI”) tax expense in the period in which it is incurred. As a result, no deferred tax impact of GILTI has been provided in the consolidated financial statements.

The Company files income tax returns in the U.S. federal jurisdiction and numerous U.S. state jurisdictions. With few exceptions, as of December 31, 2021, the Company is no longer subject to U.S. federal and state income tax examinations for tax years prior to 2018.

As of December 31, 2021 and 2020, the Company had no unrecognized tax benefits recorded related to uncertain tax positions.