Ameriprise 2008 Annual Report Download - page 155

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2008 is as follows:
(in millions)
Balance at January 1 $ 164
Reductions based on tax positions related to the current year (164)
Additions for tax positions of prior years 64
Reductions for tax positions of prior years (120)
Settlements —
Balance at December 31 $ (56)
If recognized, approximately $62 million and $84 million, net of federal tax benefits, of the unrecognized tax benefits as of
December 31, 2008 and 2007, respectively, would affect the effective tax rate.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax
provision. The Company recognized a net reduction of $25 million in interest and penalties for the year ended December 31,
2008. The Company had a $13 million receivable and a $12 million liability for the payment of interest and penalties accrued
at December 31, 2008 and 2007, respectively.
It is reasonably possible that the total amounts of unrecognized tax benefits will change in the next 12 months. However, there
are a number of open audits and quantification of a range cannot be made at this time.
The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and
foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S.
income tax examinations by tax authorities for years before 1997. The Internal Revenue Service (‘‘IRS’’), as part of the overall
examination of the American Express Company consolidated return, completed its field examination of the Company’s U.S.
income tax returns for 1997 through 2002 during 2008. However, for federal income tax purposes these years continue to
remain open as a consequence of certain issues under appeal. The IRS continued its examination of 2003 through 2004
which is expected to be completed during 2009. In the fourth quarter of 2008, the IRS commenced an examination of the
Company’s U.S. income tax returns for 2005 through 2007. The Company’s or certain of its subsidiaries’ state income tax
returns are currently under examination by various jurisdictions for years ranging from 1998 through 2006.
On September 25, 2007, the IRS issued Revenue Ruling 2007-61 in which it announced that it intends to issue regulations
with respect to certain computational aspects of the Dividends Received Deduction (‘‘DRD’’) related to separate account
assets held in connection with variable contracts of life insurance companies. Revenue Ruling 2007-61 suspended a revenue
ruling issued in August 2007 that purported to change accepted industry and IRS interpretations of the statutes governing
these computational questions. 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 members of the public 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, but they may result in the elimination of some or all of
the separate account DRD tax benefit that the Company receives. Management believes that it is likely that any such
regulations would apply prospectively only.
As a result of the Separation from American Express, the Company’s life insurance subsidiaries will not be able to file a
consolidated U.S. federal income tax return with the other members of the Company’s affiliated group until 2010.
The Company’s tax allocation agreement with American Express (the ‘‘Tax Allocation Agreement’’), dated as of September 30,
2005, governs the allocation of consolidated U.S. federal and applicable combined or unitary state and local income tax
liabilities between American Express and the Company for tax periods prior to September 30, 2005. In addition, this Tax
Allocation Agreement addresses other tax-related matters.
The items comprising other comprehensive loss are presented net of the following income tax provision (benefit) amounts:
Years Ended December 31,
2008 2007 2006
(in millions)
Net unrealized securities gains (losses) $ (427) $ 10 $ (30)
Net unrealized derivatives gains (losses) (1) (2) (4)
Foreign currency translation adjustment (4) (1) 4
Defined benefit plans (34) 15 —
Net income tax provision (benefit) $ (466) $ 22 $ (30)
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