Voya Financial Inc
For the period ended Dec 31, 2023. Filed Feb 23, 2024.
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FY2023 · Filed Feb 23, 2024
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. Income Taxes
- Income Taxes
Income tax expense (benefit) consisted of the following for the periods indicated:
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Current tax expense (benefit): | |||
| Federal | $6 | $(5) | $(463) |
| State | 5 | (3) | 19 |
| Total current tax expense (benefit) | 11 | (8) | (444) |
| Deferred tax expense (benefit): | |||
| Federal | (50) | 8 | 457 |
| State | (12) | (5) | (47) |
| Total deferred tax expense (benefit) | (62) | 3 | 410 |
| Total income tax expense (benefit) | $(51) | $(5) | $(34) |
Income taxes were different from the amount computed by applying the federal income tax rate to Income (loss) before income taxes for the following reasons for the periods indicated:
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Income (loss) before income taxes | $678 | $428 | $3,085 |
| Tax Rate | 21.0% | 21.0% | 21.0% |
| Income tax expense (benefit) at federal statutory rate | 142 | 90 | 648 |
| Tax effect of: | |||
| Valuation allowance | (1) | 7 | (521) |
| Dividends received deduction | (38) | (44) | (34) |
| State tax expense (benefit) | (6) | (16) | 37 |
| Noncontrolling interest | (22) | 16 | (161) |
| Tax credits | (17) | (63) | (14) |
| Nondeductible expenses | 6 | 7 | 5 |
| Security Life of Denver Company capital loss carryback (1) | (92) | — | — |
| Non-taxable Voya India gain (1) | (10) | — | — |
| Other | (13) | (2) | 6 |
| Income tax expense (benefit) | $(51) | $(5) | $(34) |
| Effective tax rate | (7.5)% | (1.2)% | (1.1)% |
(1) See Other Tax Matters section below
Current Income Tax
The Company had a current income tax receivable/(payable) of $12 and $5 as of December 31, 2023 and 2022, respectively.
Temporary Differences
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities were as follows as of the dates indicated:
| December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Deferred tax assets | ||
| Federal and state loss carryforwards | $1,489 | $1,523 |
| Net unrealized investment losses | 484 | 666 |
| Compensation and benefits | 190 | 179 |
| Current discount rate (1) | 187 | 180 |
| Tax credits | 131 | 110 |
| Insurance Reserves | 9 | — |
| Investments | 5 | 30 |
| Other assets | 165 | 82 |
| Total gross assets before valuation allowance | 2,660 | 2,770 |
| Less: Valuation allowance | 95 | 70 |
| Assets, net of valuation allowance | 2,565 | 2,700 |
| Deferred tax liabilities | ||
| Deferred policy acquisition costs | (358) | (392) |
| Insurance reserves | — | (85) |
| Other liabilities | (47) | — |
| Total gross liabilities | (405) | (477) |
| Net deferred income tax asset (liability) (2) | $2,160 | $2,223 |
(1)Current discount rate is a result of the adoption of ASU 2018-12. See the Business, Basis of Presentation and Significant Accounting Policies Note to these Consolidated Financial Statements for additional information
(2) $45 of net deferred tax assets, including a $26 valuation allowance, were a result of the Benefitfocus acquisition
The following table sets forth the federal, state and credit carryforwards for tax purposes as of the dates indicated:
| December 31, | |||
|---|---|---|---|
| 2023 · 2022 | |||
| Federal net operating loss carryforward | $6,667 | (1) | $6,816 |
| State net operating loss carryforward | 2,454 | (2) | 2,069 |
| Credit carryforward | 131 | (3) | 110 |
(1)Approximately $3,617 of the net operating losses carryforwards ("NOL") not subject to expiration. $3,050 of the NOLs expire between 2025 and 2037
(2) Approximately $829 of the NOLs not subject to expiration. $1,625 of the NOLs expire between 2024 and 2043
(3) Expires between 2032 and 2042
As a result of the Benefitfocus acquisition, the Company acquired $62 of federal net operating losses ("NOL"), subject to a section 382 limitation. The Company expects to fully realize these NOLs prior to expiration.
Valuation allowances are provided when it is considered more likely than not that some portion or all of the deferred tax assets ("DTA") will not be realized. As of December 31, 2023 and 2022, the Company had a total valuation allowance of $95 and $70, respectively. As of December 31, 2023 and 2022, $218 and $193, respectively, of this valuation allowance was allocated to continuing operations and $(123) and $(123) allocated to Other comprehensive income (loss) related to realized and unrealized capital losses, respectively. The increase in the valuation allowance was a result of the Benefitfocus acquisition.
Significant judgment is required to evaluate the need for a valuation allowance against DTAs. The Company reviews all available positive and negative evidence to determine if a valuation allowance is recorded, including historical and projected pre-tax book income, tax planning strategies and reversals of temporary differences. As of December 31, 2023, the Company had year-to-date gains primarily on securities of $863 in Other comprehensive income, decreasing the related DTA. Additionally, operating income remained positive for the period and was largely consistent with the 2022 year-end valuation allowance analysis. After evaluating the positive and negative evidence, the Company did not change its judgment regarding the realization of DTAs in 2023.
The valuation allowance as of December 31, 2023 of $95 was against certain historic state net operating losses and state tax credits that were below more likely than not to be utilized. The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of these DTAs.
Other Tax Matters
On January 4, 2021, the Company completed a series of transactions pursuant to a Master Transaction Agreement ("MTA") with Resolution Life U.S. Holdings Inc. ("Resolution Life US"). As a part of these transactions, Resolution Life US acquired the Company's wholly owned subsidiary, Security Life of Denver Company ("SLD"). SLD generated capital losses in the 2022 tax year, which were included in a carryback claim for the Company in accordance with the MTA and resulted in a $92 tax benefit and decrease to the effective tax rate (the "Security Life of Denver Company capital loss carryback") for the Company.
On August 1, 2023, the Company acquired all remaining equity interest in Voya India. The transaction resulted in a GAAP-to-tax outside basis difference of $45. The Company has asserted that its investment in India as of the August 1, 2023 acquisition date is permanently reinvested; therefore, no provision for U.S. federal and state income taxes or foreign withholding taxes has been made in the Company’s current year consolidated financial statements related to the acquisition.
Unrecognized Tax Benefits
Reconciliations of the change in the unrecognized income tax benefits were as follows for the periods indicated:
| Year Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| Balance at beginning of period | $33 | $34 | $33 |
| Additions (reductions) for tax positions related to current year | — | — | 1 |
| Additions (reductions) for tax positions related to prior years | (6) | (1) | — |
| Balance at end of period | $27 | $33 | $34 |
The Company had $1, $1, and $1 of unrecognized tax benefits as of December 31, 2023, 2022 and 2021, respectively, which would affect the Company's effective rate if recognized.
Interest and Penalties
The Company recognizes interest expense and penalties, if applicable, related to unrecognized tax benefits in tax expense net of federal income tax. The total amounts of gross accrued interest and penalties on the Company's Consolidated Balance Sheets as of December 31, 2023 and 2022 were immaterial. The Company recognizedno gross interest (benefit) related to unrecognized tax in its Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021.
The timing of the payment of the remaining accrued interest and penalties cannot be reasonably estimated.
Tax Regulatory Matters
For the tax years 2021 through 2023, the Company participated in the Internal Revenue Service ("IRS") Compliance Assurance Process ("CAP"), which is a continuous audit program provided by the IRS. For the 2023 tax year, the Company was in the Compliance Maintenance Bridge ("Bridge") phase of CAP. In the Bridge phase, the IRS did not conduct any review or provide any letters of assurance for that tax year.
Tax Legislative Matters
In August 2022, the Inflation Reduction Act was signed into law creating the corporate alternative minimum tax ("CAMT"). The IRS has only issued limited guidance on the CAMT, and uncertainty remains regarding the application of and potential adjustments to the CAMT. The Company is not subject to the CAMT based on this guidance and will continue to evaluate the applicability as more guidance is provided.
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