Ameriprise 2009 Annual Report Download - page 161

The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be
realized. Included in deferred tax assets is a significant deferred tax asset relating to capital losses that have been recognized for financial
statement purposes but not yet for tax return purposes. Under current U.S. federal income tax law, capital losses generally must be used
against capital gain income within five years of the year in which the capital losses are recognized for tax purposes. Significant judgment is
required in determining if a valuation allowance should be established, and the amount of such allowance if required. Factors used in
making this determination include estimates relating to the performance of the business including the ability to generate capital gains.
Consideration is given to, among other things in making this determination, i) future taxable income exclusive of reversing temporary
differences and carryforwards, ii) future reversals of existing taxable temporary differences, iii) taxable income in prior carryback years,
and iv) tax planning strategies. Based on analysis of the Company’s tax position, management believes it is more likely than not that the
results of future operations and implementation of tax planning strategies will generate sufficient taxable income to enable the Company
to utilize all of its deferred tax assets. Accordingly, no valuation allowance for deferred tax assets has been established as of December 31,
2009 and 2008.
Included in the Company’s deferred income tax assets are tax benefits related to net operating loss carryforwards of $59 million which
will expire beginning December 31, 2025 as well as tax credit carryforwards of $166 million which will expire beginning December 31,
2025.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2009 is as follows:
2009 2008 2007
(in millions)
Balance at January 1 $ (56) $ 164 $ 113
Additions (reductions) based on tax positions related to the current year 1 (164) 42
Additions for tax positions of prior years 45 64 56
Reductions for tax positions of prior years (23) (120) (45)
Settlements — — (2)
Balance at December 31 $ (33) $ (56) $ 164
If recognized, approximately $81 million, $62 million and $84 million, net of federal tax benefits, of the unrecognized tax benefits as of
December 31, 2009, 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 $1 million in interest and penalties for the year ended December 31, 2009 and a net reduction of $25 million and $4
million in interest and penalties for the years ended December 31, 2008 and 2007, respectively. At December 31, 2009 and 2008, the
Company had a receivable of $12 million and $13 million, respectively, related to accrued interest and penalties.
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 and completed its field examination of 2003 through 2004 in the third quarter of 2009. However, for federal income tax purposes
these years continue to remain open as a consequence of certain issues under appeal. In the fourth quarter of 2008, the IRS commenced
an examination of the Company’s U.S. income tax returns for 2005 through 2007, which is expected to be completed in 2010. 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
146 ANNUAL REPORT 2009