AIG 2014 Annual Report Download - page 334

ITEM 8 / NOTE 24. INCOME TAXES
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Assessment of Deferred Tax Asset Valuation Allowance
The evaluation of the recoverability of the deferred tax asset and the need for a valuation allowance requires us to weigh all
positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax
asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively
verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support
a conclusion that a valuation allowance is not needed.
Our framework for assessing the recoverability of deferred tax assets requires us to consider all available evidence, including:
• the nature, frequency, and amount of cumulative financial reporting income and losses in recent years;
• the sustainability of recent operating profitability of our subsidiaries;
• the predictability of future operating profitability of the character necessary to realize the net deferred tax asset;
• the carryforward periods for the net operating loss, capital loss and foreign tax credit carryforwards, including the effect of
reversing taxable temporary differences; and,
• prudent and feasible actions and tax planning strategies that would be implemented, if necessary, to protect against the loss
of the deferred tax asset.
As a result of sales in the ordinary course of business to manage the investment portfolio and other transactions during the
year ended December 31, 2014, remaining U.S. Life Insurance Companies capital loss carryforwards were realized prior to
their expiration. This, together with the changes in market conditions, resulted in a conclusion that deferred tax assets related
to unrealized tax losses in the U.S. Life Insurance Companies’ available for sale portfolio will more-likely-than-not be realized.
Accordingly, the related deferred tax asset valuation allowance was released.
Therefore, for the year ended December 31, 2014, we recognized a decrease of $1.8 billion in the capital loss carryforward
valuation allowance associated with the U.S. Life Insurance Companies, of which $209 million was allocated to income from
continuing operations and $1.6 billion was allocated to other comprehensive income. Included in the $1.8 billion was a
decrease in the capital loss carryforward valuation allowance of $314 million related to a portion of the U.S. Life Insurance
Companies’ capital loss carryforward previously treated as expired that was restored and utilized in 2014.
During the year ended December 31, 2014, we also recognized a $325 million decrease in our deferred tax asset valuation
allowance associated with certain state, local and foreign jurisdictions, primarily attributable to a corresponding reduction in
state and local deferred tax assets.
The following table presents the net deferred tax assets (liabilities) at December 31, 2014 and 2013 on a U.S. GAAP
basis:
December 31,
(in millions) 2014 2013
Net U.S. consolidated return group deferred tax assets $24,543 $ 26,296
Net deferred tax assets (liabilities) in accumulated other comprehensive income (5,510) (3,337)
Valuation allowance (129) (1,650)
Subtotal 18,904 21,309
Net foreign, state and local deferred tax assets 2,045 2,563
Valuation allowance (1,610) (1,947)
Subtotal 435 616
Subtotal - Net U.S, foreign, state and local deferred tax assets 19,339 21,925
Net foreign, state and local deferred tax liabilities (594) (732)
Total AIG net deferred tax assets (liabilities) $18,745 $ 21,193