MetLife 2009 Annual Report Download - page 181

At December 31, 2008, the Company’s total amount of unrecognized tax benefits was $766 million and the total amount of unrecognized
tax benefits that would affect the effective tax rate, if recognized, was $567 million. The total amount of unrecognized tax benefits decreased
by $74 million from December 31, 2007 primarily due to settlements reached with the IRS with respect to certain significant issues involving
demutualization, leasing and tax credits offset by additions for tax positions of the current year. As a result of the settlements, items within the
liability for unrecognized tax benefits, in the amount of $153 million, were reclassified to current and deferred income tax payable, as
applicable, of which $20 million was paid in 2008 and $133 million was paid in 2009.
At December 31, 2009, the Company’s total amount of unrecognized tax benefits was $773 million and the total amount of unrecognized
tax benefits that would affect the effective tax rate, if recognized, was $583 million. The total amount of unrecognized tax benefits increased
by $7 million from December 31, 2008 primarily due to additions for tax positions of the current and prior years offset by settlements reached
with the IRS. Settlements with tax authorities amounted to $46 million, of which $44 million was reclassified to current income tax payable and
paid in 2009 and $2 million reduced current income tax expense.
The Company’s liability for unrecognized tax benefits may decrease in the next 12 months pending the outcome of remaining issues, tax-
exempt income and tax credits, associated with the 2000 to 2002 IRS audit. A reasonable estimate of decrease cannot be made at this time.
However, the Company continues to believe that the ultimate resolution of the issues will not result in a material change to its consolidated
financial statements, although the resolution of income tax matters could impact the Company’s effective tax rate for a particular future period.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
2009 2008 2007
Years Ended December 31,
(In millions)
Balanceatbeginningoftheperiod........................................ $766 $840 $932
Additionsfortaxpositionsofprioryears .................................... 43 11 73
Reductionsfortaxpositionsofprioryears ................................... (33) (51) (53)
Additionsfortaxpositionsofcurrentyear.................................... 52 147 77
Reductionsfortaxpositionsofcurrentyear .................................. (9) (22) (8)
Settlementswithtaxauthorities .......................................... (46) (153) (177)
Lapsesofstatutesoflimitations.......................................... — (6) (4)
Balanceatendoftheperiod............................................ $773 $766 $840
During the year ended December 31, 2007, the Company recognized $81 million in interest expense associated with the liability for
unrecognized tax benefits. At December 31, 2007, the Company had $218 million of accrued interest associated with the liability for
unrecognized tax benefits. The $8 million increase from January 1, 2007 in accrued interest associated with the liability for unrecognized tax
benefits resulted from an increase of $81 million of interest expense and a $73 million decrease primarily resulting from the aforementioned
IRS settlements. The $73 million was reclassified to current income tax payable in 2007 and paid in 2009.
During the year ended December 31, 2008, the Company recognized $37 million in interest expense associated with the liability for
unrecognized tax benefits. At December 31, 2008, the Company had $176 million of accrued interest associated with the liability for
unrecognized tax benefits. The $42 million decrease from December 31, 2007 in accrued interest associated with the liability for
unrecognized tax benefits resulted from an increase of $37 million of interest expense and a $79 million decrease primarily resulting from
the aforementioned IRS settlements. Of the $79 million decrease, $78 million was reclassified to current income tax payable in 2008, with
$7 million and $71 million paid in 2008 and 2009, respectively. The remaining $1 million reduced interest expense.
During the year ended December 31, 2009, the Company recognized $44 million in interest expense associated with the liability for
unrecognized tax benefits. At December 31, 2009, the Company had $198 million of accrued interest associated with the liability for
unrecognized tax benefits. The $22 million increase from December 31, 2008 in accrued interest associated with the liability for unrecognized
tax benefits resulted from an increase of $44 million of interest expense and a $22 million decrease primarily resulting from the aforemen-
tioned IRS settlements. Of the $22 million decrease, $20 million has been reclassified to current income tax payable and was paid in 2009.
The remaining $2 million reduced interest expense.
The U.S. Treasury Department and the IRS have indicated that they intend to address through regulations the methodology to be followed
in determining the dividends received deduction (“DRD”), related to variable life insurance and annuity contracts. The DRD reduces the
amount of dividend income subject to tax and is a significant component of the difference between the actual tax expense and expected
amount determined using the federal statutory tax rate of 35%. Any regulations that the IRS ultimately proposes for issuance in this area will be
subject to public notice and comment, at which time insurance companies and other interested parties will have the opportunity to raise legal
and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any
such regulations are unknown at this time. For the years ended December 31, 2009 and 2008, the Company recognized an income tax
benefit of $216 million and $179 million, respectively, related to the separate account DRD. The 2009 benefit included a benefit of $33 million
related to a true-up of the prior year tax return.
16. Contingencies, Commitments and Guarantees
Contingencies
Litigation
The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts,
including punitive and treble damages, are sought. Modern pleading practice in the United States permits considerable variation in the
F-97MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)