AIG 2015 Annual Report Download - page 332

ITEM 8 / NOTE 22. INCOME TAXES
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Our actual income tax (benefit) expense differs from the statutory U.S. federal amount computed by applying the
federal income tax rate due to the following:
2015 2014 2013
Pre-Tax Tax Percent of Pre-Tax Tax Percent of Tax Percent of
Years Ended December 31, Income Expense/ Pre-Tax Income Expense/ Pre-Tax Pre-Tax Expense/ Pre-Tax
(dollars in millions) (Loss) (Benefit) Income (Loss) (Loss) (Benefit) Income (Loss) Income (Benefit) Income
U.S. federal income tax at statutory rate $ 3,281 $ 1,148 35.0 %$ 10,524 $ 3,683 35.0 % $ 9,518 $ 3,331 35.0 %
Adjustments:
Tax exempt interest (195) (5.9) (236) (2.2) (298) (3.1)
Uncertain tax positions 195 5.9 (81) (0.8) 632 6.6
Reclassifications from accumulated
other comprehensive income (127) (3.9) (61) (0.6) - -
Non-deductible transfer pricing
charges 97 3.0 86 0.8 - -
Dividends received deduction (72) (2.2) (62) (0.6) (75) (0.8)
Effect of foreign operations (58) (1.8) (68) (0.6) (5) (0.1)
State income taxes 34 1.0 39 0.4 (21) (0.2)
Other (73) (2.2) (184) (1.7) 13 0.1
Effect of discontinued operations - - 65 0.6 14 0.1
Valuation allowance:
Continuing operations 110 3.4 (181) (1.7) (3,165) (33.3)
Consolidated total amounts 3,281 1,059 32.3 10,524 3,000 28.5 9,518 426 4.5
Amounts attributable to discontinued
operations - - - 23 73 317.4 150 66 44.3
Amounts attributable to continuing
operations $ 3,281 $ 1,059 32.3 %$ 10,501 $ 2,927 27.9 % $ 9,368 $ 360 3.8 %
For the year ended December 31, 2015, the effective tax rate on income from continuing operations was 32.3 percent. The
effective tax rate on income from continuing operations differs from the statutory tax rate of 35 percent primarily due to tax
benefits of $195 million associated with tax exempt interest income, $127 million related to reclassifications from accumulated
other comprehensive income to income from continuing operations related to the disposal of available for sale securities, $58
million associated with the effect of foreign operations, and $109 million related to the partial completion of the Internal
Revenue Service examination covering tax year 2006, partially offset by $324 million of tax charges and related interest
associated with increases in uncertain tax positions related to cross border financing transactions, and $110 million related to
increases in the deferred tax asset valuation allowances associated with certain foreign jurisdictions.
For the year ended December 31, 2015, our repatriation assumptions related to certain European operations changed, and
related foreign earnings are now considered to be indefinitely reinvested. These earnings relate to ongoing operations and
have been reinvested in active non-U.S. business operations. Further, we do not intend to repatriate these earnings to fund
U.S. operations. As a result, U.S. deferred taxes have not been provided on $1.8 billion of accumulated earnings, including
accumulated other comprehensive income, of these non-U.S. affiliates. Potential U.S. income tax liabilities related to such
earnings would be offset, in whole or in part, by allowable foreign tax credits resulting from foreign taxes paid to foreign
jurisdictions in which such operations are located. As a result, we currently believe that any incremental U.S. income tax
liabilities relating to indefinitely reinvested foreign earnings would not be significant. Deferred taxes have been provided on
earnings of non-U.S. affiliates whose earnings are not indefinitely reinvested.
For the year ended December 31, 2014, the effective tax rate on income from continuing operations was 27.9 percent. The
effective tax rate on income from continuing operations differs from the statutory tax rate of 35 percent primarily due to tax
benefits of $236 million associated with tax exempt interest income, $209 million related to a decrease in the U.S. Life
Insurance Companies’ capital loss carryforward valuation allowance, $182 million of income excludible from gross income
related to the global resolution of certain residential mortgage-related disputes and $68 million associated with the effect of
foreign operations.