Status: On January 10, 2018, the SAPWG moved this agenda item to active listing as nonsubstantive and exposed revisions to SSAP No. 101 guidance to reflect federal tax code revisions.
Details: The SAP Working Group considered how changes in the federal tax code enacted by the TCJA will impact the admittance of DTAs under existing statutory guidance, aiming to determine if significant revisions to SSAP No. 101 – Income Taxes are recommended.
The calculation of admitted adjusted gross DTA follows a three-step process. First, the carryback provision is applied to adjusted gross DTAs (gross DTAs less Statutory Valuation Allowance) – under TCJA, NOL carryback has been eliminated for life entities but retained for property/casualty companies. Next, the remaining amount of gross DTAs is limited to the amount calculated by applying the future 3-year realization provision, and the admitted amount is limited to the applicable percentage of adjusted capital and surplus (15% for most entities). As the final step, any remaining DTAs are offset against DTLs to determine the admitted amount to be reported on the balance sheet.
A study conducted by NAIC staff on a population of 3,127 entities that reported deferred tax data in Note 9 of the 2016 statutory financial statements found that for 3,030 of these entities the combined DTAs did not exceed 15% of capital and surplus. Based on the results of this analysis, it has been concluded that the amount of DTAs allowed to be admitted will not be significantly impacted by the changes to the carryback provision. As such, it has been determined that revisions to SSAP No. 101 for admittance concepts are not necessary.
NAIC staff also analyzed the benefit to surplus expected to be derived from the federal tax rate reduction from 35% to 21%, using 2016 figures as a benchmark. Estimated savings from the tax rate change amounted to $12 billion, and the total current federal income tax was projected to reflect 1.29% of capital and surplus. Results of the federal income tax study are summarized in the table below:
View the SAPWG meeting minutes.