Voya 2013 Annual Report Download - page 89

which may be offset by a pre-change loss is subject to an annual limitation. Generally speaking, this limitation is
derived by multiplying the fair market value of the stock of the taxpayer immediately before the date of the
ownership change by the applicable federal long-term tax-exempt rate. In addition, to the extent that a company
has a net unrealized built-in loss or deduction at the time of an ownership change, Sections 382 and 383 limit the
utilization of any such loss or deduction which is realized and recognized during the five-year period following
the ownership change.
Under the current base case for ING Group’s divestiture of its remaining ownership stake in the Company, it
is likely that an ownership change will occur by December 31, 2014. As discussed in “Item 1. Business—ING
Group Restructuring Plan with European Commission,” ING Group is required, under the terms of the 2012
Amended Restructuring Plan, to fully divest its ownership of the Company by the end of 2016. Depending on the
size and timing of transactions, the Company may be subject to a second Section 382 event as ING Group
completes its divestment. Although we are unaware of any specific adverse impact from such an event, a second
382 event could impose additional limitations on the use of then existing realized and built-in losses and other tax
attributes and may have a material adverse effect on the Company’s tax expense and equity position.
In addition, in November 2008, ING Group issued €10 billion of core Tier 1 securities to the Dutch State in
connection with a capital infusion that would need to be taken into account for purposes of determining if an
ownership change has occurred. ING Group redeemed approximately half (€5 billion) of these securities in
December 2009 (and issued new shares to the public at that time); an additional 20% (€2 billion) in May 2011;
7.5% (€0.75 billion) in November 2012; and 7.5% (€0.75 billion) in November 2013. As part of the 2012
Amended Restructuring Plan, ING Group has committed to repay the remaining €1.5 billion of Core Tier I
securities, plus a 50% premium in two equal tranches in the next two years. Based on the current repayment
schedule, the two tranches are expected to be repaid in March 2014 and May 2015. The redemption by ING
Group of an additional amount of these securities or other transfers of securities may, depending on the facts and
circumstances, trigger an ownership change, as described above.
Under U.S. GAAP, as of December 31, 2013, our tax attributes included a valuation allowance of $2.8 billion.
We are uncertain as to the ultimate financial impact of an ownership change. Using amounts available at December 31,
2013, we estimate that the deferred tax asset potentially subject to an additional tax valuation allowance is $315 million
to $350 million (mainly as a result of built-in losses). Such an additional tax valuation allowance may be recorded as a
tax expense in tax on continuing operations, which could change following the final Section 382 calculations. The
actual impact on the valuation allowance is dependent mainly on the level of unrealized capital gains and losses at the
time of the ownership change, the calculated Section 382 limitation, the estimated reversal pattern of capital losses
otherwise supported by tax planning strategies, the estimated reversal pattern of unrealized capital gains comprising
such strategies, the estimated reversal pattern of unrealized built-in capital losses subject to the limitation and the level
of the valuation allowance otherwise held prior to the Section 382 event.
Under statutory accounting, a Section 382 event could reduce the admitted deferred tax asset by $39 million
if measured as of December 31, 2013. This amount could change following the final Section 382 calculations.
The reduction in the admitted deferred tax asset could adversely impact our insurance company subsidiaries’
ability to pay dividends or other distributions (directly or indirectly) to ING U.S., Inc. This in turn could
negatively impact our ability to pay dividends to our stockholders and to service our debt. The actual impact is
dependent mainly on the level of unrealized gains and losses at the time of the ownership change and the
calculated Section 382 limitation.
Using the estimated Section 382 value of the Company based on a share price of $35.15 per share as of
December 31, 2013 and other information available as of December 31, 2013, we estimate that it is unlikely that
the deferred tax asset, the tax valuation allowance or the admitted deferred tax asset will change as a result of a
Section 382 event.
Numerous aspects of the application of Section 382 are subject to potential challenge by the IRS. Among
these are our calculation of the value of the Company at the time of an ownership change and our calculations of
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