The Hartford 2010 Annual Report Download - page 32
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32
In Revenue Ruling 2007-61, issued on September 25, 2007, the IRS announced its intention to issue regulations with respect to certain
computational aspects of the DRD on separate account assets held in connection with variable annuity contracts. Revenue Ruling 2007-
61 suspended Revenue Ruling 2007-54, 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 may ultimately propose 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, but they could result in the elimination of some or all of the separate account DRD tax
benefit that the Company receives. Management believes that it is highly likely that any such regulations would apply prospectively
only.
The Company receives a foreign tax credit against its U.S. tax liability for foreign taxes paid by the Company including payments from
its separate account assets. The separate account foreign tax credit is estimated for the current year using information from the most
recent filed return, adjusted for the change in the allocation of separate account investments to the international equity markets during
the current year. The actual current year foreign tax credit can vary from the estimates due to actual foreign tax credits passed through
by the mutual funds. The Company recorded benefits of $4, $16 and $16 related to the separate account foreign tax credit in the years
ended December 31, 2010, 2009 and 2008, respectively. These amounts included benefits (charges) related to prior years’ tax returns of
$(4), $3 and $4 in 2010, 2009 and 2008, respectively.
The Company’ s unrecognized tax benefits were unchanged during 2010, remaining at $48 as of December 31, 2010. This entire
amount, if it were recognized, would affect the effective tax rate.