SSAP No. 10 Superseded SSAPs and Nullified Interpretations
H-10-26
Without Reversing
Temporary Differences
With Reversing Temporary
Differences
Regular Tax AMT Regular Tax AMT
Regular Taxable Income $8,000,000 $8,000,000 $8,000,000 $8,000,000
AMT/ACE Adjustment 6,375,000
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6,375,000
Reversing Temporary Differences (2,000,000) (2,000,000)
Taxable Income 8,000,000 14,375,000 6,000,000 12,375,000
Tax (35% regular/20% AMT) 2,800,000 2,875,000 2,100,000 2,475,000
Tax Liability $2,800,000 75,000 $2,100,000 375,000
Total Tax $2,875,000 $2,475,000
6.7 In 2002, the reversing deductible temporary differences of $2,000,000 are expected to save P&C
income taxes at a rate of 20% or $400,000 ($2,875,000 – $2,475,000). The remaining 15% tax benefit
represents an additional AMT credit carryover of $300,000 ($375,000 – $75,000). Therefore, P&C’s
admitted gross DTAs under paragraph 10.b.i. before reduction for any admitted gross DTAs under
paragraph 10.a. would be 400,000, which is less than the amount of its gross DTAs of $700,000
($2,000,000 x 35%) on reversing deductible temporary differences at the enacted rate. However, the
$300,000 difference generated by the 15% (35% - 20%) rate differential under paragraph 10.b.i. would be
taken into account in the paragraph 10.c. calculation to offset existing gross DTLs.
Example 2:
6.8 SL is a small life insurance company with projected assets of less than $500 million at the end of
2002. SL also estimates that its taxable income before the small life insurance company deduction
(SLICD) will be $1,300,000. Included in this amount is $400,000 of reversing deductible temporary items
that were part of SL’s deferred inventory at 12/31/01.
Without Reversing
Temporary Differences
With Reversing Temporary
Differences
Regular Tax AMT Regular Tax AMT
Regular Taxable Income before
SLICD $1,700,000 $1,700,000 $1,700,000 $1,700,000
Reversing Temporary Differences (400,000) (400,000)
Net 1,700,000 1,700,000 1,300,000 1,300,000
Small Life Insurance Company
Deduction (60%) (1,020,000) (1,020,000) (780,000) (780,000)
AMT/ACE Adjustment (75% of
SLICD) 765,000 585,000
Taxable Income 680,000 1,445,000 520,000 1,105,000
Tax (35% regular/20% AMT) 238,000 289,000 182,000 221,000
Tax Liability $238,000 51,000 $182,000 39,000
Total Tax $289,000 $221,000
6.9 Since SL is a small life insurance company with less than $3 million of taxable income before the
small life insurance company deduction, it is taxed at an effective federal income tax rate of 17%. The
$400,000 of reversing deductible temporary differences in 2002 is expected to save SL $68,000
($289,000 - $221,000) in federal income taxes at the 17% rate. The tax savings represents a reduction in
regular taxes of $56,000 and AMT taxes of $12,000. Under paragraph 10.b.i., SL would admit gross
DTAs of $68,000, before reduction for any gross DTAs admitted under paragraph 10.a. Any unused
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$10,000,000 x 85% x 75%
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