Voya Financial Inc
For the period ended Dec 31, 2024. Filed Feb 21, 2025.
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FY2024 · Filed Feb 21, 2025
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18. Income Taxes
- Income Taxes
Income tax expense (benefit) consisted of the following for the periods indicated:
| Year Ended December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Current tax expense (benefit): | |||
| Federal | $1 | $2 | $(6) |
| Foreign | 9 | 4 | 1 |
| State | 5 | 5 | (3) |
| Total current tax expense (benefit) | 15 | 11 | (8) |
| Deferred tax expense (benefit): | |||
| Federal | 38 | (50) | 8 |
| State | 4 | (12) | (5) |
| Total deferred tax expense (benefit) | 42 | (62) | 3 |
| Total income tax expense (benefit) | $57 | $(51) | $(5) |
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, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Income (loss) before income taxes | $799 | $678 | $428 |
| Tax Rate | 21.0% | 21.0% | 21.0% |
| Income tax expense (benefit) at federal statutory rate | 168 | 142 | 90 |
| Tax effect of: | |||
| Valuation allowance | 1 | (1) | 7 |
| Dividends received deduction | (49) | (38) | (44) |
| State tax expense (benefit) | 8 | (6) | (16) |
| Noncontrolling interest | (16) | (22) | 16 |
| Tax credits | (19) | (17) | (63) |
| Nondeductible expenses | 3 | 6 | 7 |
| Security Life of Denver Company capital loss carryback (1) | (38) | (92) | — |
| Non-taxable Voya India gain (1) | — | (10) | — |
| Other | (1) | (13) | (2) |
| Income tax expense (benefit) | $57 | $(51) | $(5) |
| Effective tax rate | 7.1% | (7.5)% | (1.2)% |
(1) See Other Tax Matters section below
Current Income Tax
The Company had a current income tax receivable of $12 as of December 31, 2024 and 2023, which is included in Other assets on the Consolidated Balance Sheets.
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, | ||
|---|---|---|
| 2024 | 2023 | |
| Deferred tax assets | ||
| Federal and state loss carryforwards | $1,421 | $1,489 |
| Net unrealized investment losses | 522 | 484 |
| Compensation and benefits | 161 | 190 |
| Current discount rate | 165 | 187 |
| Tax credits | 154 | 131 |
| Insurance Reserves | — | 9 |
| Investments | 47 | 5 |
| Other assets | 175 | 165 |
| Total gross assets before valuation allowance | 2,645 | 2,660 |
| Less: Valuation allowance | 96 | 95 |
| Assets, net of valuation allowance | 2,549 | 2,565 |
| Deferred tax liabilities | ||
| Deferred policy acquisition costs | (324) | (358) |
| Insurance reserves | (24) | — |
| Other liabilities | (67) | (47) |
| Total gross liabilities | (415) | (405) |
| Net deferred income tax asset (liability) | $2,134 | $2,160 |
The following table sets forth the federal, state and credit carryforwards for tax purposes as of the dates indicated:
| December 31, | |||
|---|---|---|---|
| 2024 · 2023 | |||
| Federal net operating loss carryforward | $6,335 | (1) | $6,667 |
| State net operating loss carryforward | 2,412 | (2) | 2,454 |
| Credit carryforward | 154 | (3) | 131 |
(1)Approximately $3,320 of the net operating losses carryforwards ("NOL") not subject to expiration. $3,015 of the NOLs expire between 2025 and 2037
(2) Approximately $390 of the NOLs not subject to expiration. $2,022 of the NOLs expire between 2025 and 2043
(3) Expires between 2025 and 2044
As a result of the Benefitfocus acquisition in 2023, 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, 2024 and 2023, the Company had a total valuation allowance of $96 and $95, respectively. As of December 31, 2024 and 2023, $219 and $218, 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.
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, 2024 and 2023, the Company had net unrealized capital losses of $2.5 billion and $2.3 billion, respectively, in AOCI. The Company expects this DTA to be utilized by its hold-to-maturity tax planning strategy. Additionally, income before income taxes available to the
Company remained positive for the period. After evaluating the positive and negative evidence, the Company did not change its judgment regarding the realization of DTAs in 2024.
The valuation allowance as of December 31, 2024 of $96 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 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 2023 and 2022 tax years, which are included in the tax return for the Company. The Company recorded a $38 and $92 tax benefit in 2024 and 2023, respectively, resulting in a decrease to the effective tax rate.
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 in 2023. 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 was made in the Company’s 2023 consolidated financial statements related to the acquisition. In 2024, the Company made the assumption that future earnings would be distributed and recorded withholding taxes on the 2024 earnings.
Unrecognized Tax Benefits
Reconciliations of the change in the unrecognized income tax benefits were as follows for the periods indicated:
| Year Ended December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| Balance at beginning of period | $27 | $33 | $33 |
| Additions (reductions) for tax positions related to current year | — | — | — |
| Additions (reductions) for tax positions related to prior years | (3) | (6) | — |
| Balance at end of period | $24 | $27 | $33 |
The Company had $1 of unrecognized tax benefits as of December 31, 2024, 2023 and 2022, 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, 2024 and 2023 were immaterial. The Company recognizedno gross interest (benefit) related to unrecognized tax in its Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022.
The timing of the payment of the remaining accrued interest and penalties cannot be reasonably estimated.
Tax Regulatory Matters
For the tax years 2022 through 2024, the Company participates 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 is 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. For the 2024 tax year, the Company is in the Compliance Maintenance Bridge Plus ("Bridge Plus") phase of CAP. In the Bridge Plus phase, the IRS will review the tax return and issue either a full or partial acceptance letter upon completion of review.
The Company filed amended federal income tax returns for tax years 2012 through 2018 to claim a foreign tax credit instead of utilizing a foreign tax deduction. The Company does not anticipate an adjustment to its claim as filed. The audit of the claim is ongoing.
Tax Legislative Matters
In August 2022, the Inflation Reduction Act was signed into law creating the corporate alternative minimum tax ("CAMT"). In September 2024, the Department of Treasury issued proposed regulations providing additional guidance on the CAMT. While the Company does not expect to be subject to the CAMT for 2024, the Company continues to review the proposed regulations, and its CAMT determination will need to be evaluated in light of future guidance.
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