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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
14. Income Taxes

The Company’s income tax (provision) benefit totaled $923 million, $739 million and $(594) million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company’s effective income tax rate was approximately (16.5)%, 17.4% and 12.2% for the years ended December 31, 2023, 2022 and 2021, respectively.

The provision (benefit) for income taxes is presented in the following table:

 Years ended December 31,
(In millions)202320222021
Current:   
Federal income tax1
$809 $402 $83 
Foreign income tax2
104 54 33 
State and local income tax64 59 3 
$977 $515 $119 
Deferred:
Federal income tax331 (1,209)423 
Foreign income tax2
(2,239)6 (1)
State and local income tax8 (51)53 
(1,900)(1,254)475 
Total Income Tax Provision (Benefit)$(923)$(739)$594 
1 The federal income tax provision (benefit) for the year ended December 31, 2023 includes $49 million of proportional amortization, $(186) million of general tax credits and $103 million of transaction costs relating to low-income housing and transferable energy tax credits.
2 The foreign income tax provision (benefit) was calculated on $2,600 million, $(3,359) million and $212 million of pre-tax income (loss) generated in foreign jurisdictions for the years ended December 31, 2023, 2022 and 2021, respectively.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”). The IRA contains a number of tax-related provisions, including a 15% minimum corporate income tax on certain large corporations (“CAMT”) as well as an excise tax on stock repurchases. Based on interpretations and assumptions the Company has made regarding the CAMT provisions of the IRA, which may change once further regulatory guidance is issued, the Company believes CAMT as well as the excise tax on stock repurchases will have an immaterial impact on our financial condition.

AHL changed its domicile from Bermuda to the United States, causing AHL to become a U.S.-domiciled corporation and a U.S. taxpayer effective December 31, 2023 (the “Redomicile”) and will be subject to U.S. corporate income tax for 2024 and future years. AHL’s Bermuda subsidiaries (and AHL for pre-Redomicile periods) file protective U.S. income tax returns. AHL’s U.S. subsidiaries file, and AHL for post-Redomicile periods will file, income tax returns with the U.S. federal government and various state governments.

On December 27, 2023, the Government of Bermuda enacted the Bermuda Corporate Income Tax (“Bermuda CIT”). Commencing on January 1, 2025, the Bermuda CIT generally will impose a 15% corporate income tax on in-scope entities that are resident in Bermuda or have a Bermuda permanent establishment, without regard to any assurances that been given pursuant to the Exempted Undertakings Tax Protection Act 1966. The Company recorded material deferred tax assets as a result of the passage of the Bermuda CIT and recognized a material impact (decrease) to our consolidated effective rate upon recording the deferred tax assets.

The U.K. enacted legislation in July 2023 implementing certain Pillar Two provisions that will apply to multinational enterprises for accounting periods beginning on or after December 31, 2023. On November 29, 2023, a bill was introduced to U.K. Parliament which proposes certain amendments to the previously enacted Pillar Two legislation and which would include new Pillar Two provisions for accounting periods beginning on or after December 31, 2024. The Company continues to evaluate the potential impact on future periods of Pillar Two, pending legislative adoption by individual countries, as such legislative changes could result in changes to our effective tax rate.

The primary jurisdictions in which the Company operates and incurs income taxes are the United States, United Kingdom, and beginning January 1, 2025 Bermuda. The Company has accumulated undistributed earnings generated by certain foreign
subsidiaries, which are intended to be indefinitely reinvested. As such, no deferred taxes have been recorded for the difference between outside tax basis and the carrying amount. The Company determined that estimating the unrecognized tax liability is not practicable.

The following table reconciles the U.S. Federal statutory tax rate to the effective income tax rate:

 Years ended December 31,
 (In millions, except percentages) 202320222021
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
Income passed through to non-controlling interests(4.6)(9.0)(10.4)
State and local income taxes (net of federal benefit)1.2 (0.1)0.8 
Impact of Mergers— 7.3 — 
Impact of foreign taxes (net of foreign tax credit)(31.0)— 0.3 
Impact of equity-based compensation1.0 0.1 0.5 
Impact of valuation allowance(1.3)— — 
Tax Credits(0.6)— — 
Redomicile(1.2)— — 
Other(1.0)(1.9)— 
Effective income tax rate(16.5)%17.4 %12.2 %

The income tax provision (benefit) is presented in the following table:

 Years ended December 31,
(In millions)202320222021
Income tax provision (benefit)$(923)$(739)$594 
Income tax provision (benefit) from other comprehensive income (loss)513 (1,933)— 
Total income tax provision (benefit)$(410)$(2,672)$594 

Deferred income taxes are recorded due to temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated statements of financial condition. These temporary differences result in taxable or deductible amounts in future years.

As of December 31, 2023, the Company has $1,148 million federal net operating losses, which will begin to expire by 2026; U.S. state net operating losses of $282 million, which will begin to expire by 2031; and UK net operating losses of $99 million, which do not expire. The Company has excess foreign tax credits of $68 million as of December 31, 2023, which can be carried forward 10 years.

The Company’s deferred tax assets and liabilities in the consolidated statements of financial condition consist of the following:

 December 31,
(In millions)20232022
Asset Management
Deferred Tax Assets: 
Depreciation and amortization$395 $417 
Tax Credits68 — 
Deferred revenue11 8 
Equity-based compensation170 122 
Other74 55 
Total Deferred Tax Assets718 602 
Valuation Allowance(8)— 
Deferred Tax Assets, Net of Valuation Allowance710 602 
 December 31,
(In millions)20232022
Deferred Tax Liabilities:
Basis difference in investments163 70 
Other8 7 
Total Deferred Tax Liabilities171 77 
Total Deferred Tax Assets, Net - Asset Management$539 $525 
Retirement Services
Deferred Tax Assets:
Insurance liabilities$1,742 $1,015 
Net operating and capital loss carryforwards284 185 
Investments, including derivatives1,904 3,365 
Employee benefits8 8 
Bermuda tax1,764 — 
Investment in foreign subsidiaries1,176 1,046 
Other280 — 
Total Deferred Tax Assets7,158 5,619 
Valuation allowance(25)(105)
Deferred Tax Assets, Net of Valuation Allowance7,133 5,514 
Deferred Tax Liabilities:
Intangible assets386 379 
DAC, DSI and VOBA954 713 
Other49 29 
Total Deferred Tax Liabilities1,389 1,121 
Total Deferred Tax Assets, Net - Retirement Services$5,744 $4,393 

The valuation allowance consists of the following:

 December 31,
(In millions)20232022
U.S. federal and state net operating losses and other deferred tax assets$8 $16 
U.K. net operating losses and other deferred tax assets25 89 
Total Valuation Allowance$33 $105 

In the normal course of business, the Company is subject to examination by federal, state, local and foreign tax authorities. As of December 31, 2023, the Company’s U.S. federal, state, local and foreign income tax returns for the years 2020 through 2022 are open under the general statute of limitations provisions and therefore subject to examination. Currently, the Internal Revenue Service is examining the tax returns of the Company and certain subsidiaries for tax years 2019 to 2021. The State and City of New York are examining certain subsidiaries’ tax returns for tax years 2011 to 2021. The United Kingdom tax authorities are currently examining certain subsidiaries’ tax returns for tax year 2017. There are other examinations ongoing in other foreign jurisdictions in which the Company operates. No provisions with respect to these examinations have been recorded, other than the unrecognized tax benefits discussed below.

The following table presents a roll-forward of the beginning and ending aggregate unrecognized tax benefits for the periods presented:

Years ended December 31,
(In millions)202320222021
Balance at beginning of period$15 $— $— 
Increases based on tax positions taken in the prior years4 15 — 
Balance at end of period$19 $15 $— 
The Company has unrecognized tax benefits of $23 million and $16 million as of December 31, 2023 and December 31, 2022, respectively, which, if recognized, would impact the effective tax rate. The Company believes that it is reasonably possible that a decrease up to $11 million of unrecognized tax benefits may be recognized within the next twelve months. The Company recognizes interest and penalties related to the unrecognized tax benefits in its provision for income taxes. For the years ended December 31, 2023 and December 31, 2022, the Company accrued interest of $10 million and $5 million, respectively.

The Company has historically recorded deferred tax assets resulting from the step-up in the tax basis of assets, including intangibles, resulting from exchanges of AOG Units for Class A shares by the Former Managing Partners and Contributing Partners. A related liability has also historically been recorded in due to related parties in the consolidated statements of financial condition for the expected payments under the tax receivable agreement entered into by and among the Company, the Former Managing Partners, the Contributing Partners, and other parties thereto (as amended, the “tax receivable agreement”) (see note 19). The benefit the Company has historically obtained from the difference in the tax asset recognized and the related liability was recorded as an increase to additional paid in capital. The amortization period for the portion of the increase in tax basis related to intangibles is 15 years. The realization of the remaining portion of the increase in tax basis relates to the disposition of the underlying assets to which the step-up is attributed. The associated deferred tax assets reverse at the time of the corresponding asset disposition.

After the Mergers, the Former Managing Partners and Contributing Partners no longer own AOG Units. Therefore, there were no new exchanges subject to the tax receivable agreement during the year ended December 31, 2023 and 2022.