Humana 2014 Annual Report Download - page 114

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
106
As of December 31, 2014, we do not have material uncertain tax positions reflected in our consolidated balance
sheet.
Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or liabilities
and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates expected to be
in effect when the reported amounts are actually recovered or settled. Principal components of our net deferred tax
balances at December 31, 2014 and 2013 were as follows:
Assets (Liabilities)
2014 2013
(in millions)
Future policy benefits payable $ 320 $ 303
Compensation and other accrued expenses 176 185
Benefits payable 138 111
Net operating loss carryforward 52 51
Deferred acquisition costs 57 46
Unearned premiums 21 10
Other 18 10
Total deferred income tax assets 782 716
Valuation allowance (48)(28)
Total deferred income tax assets, net of valuation allowance 734 688
Depreciable property and intangible assets (410)(453)
Investment securities (168)(78)
Prepaid expenses (55)(83)
Total deferred income tax liabilities (633)(614)
Total net deferred income tax assets (liabilities) $ 101 $ 74
Amounts recognized in the consolidated balance sheets:
Other current assets $ 87 $ 60
Other long-term assets 14 14
Trade accounts payable and accrued expenses — —
Total net deferred income tax assets (liabilities) $ 101 $ 74
At December 31, 2014, we had approximately $141 million of net operating losses to carry forward related to prior
acquisitions and our Puerto Rico subsidiaries. These net operating loss carryforwards, if not used to offset future taxable
income, will expire from 2015 through 2033. Due to limitations and uncertainty regarding our ability to use some of
the carryforwards, a valuation allowance was established on $108 million of these net operating loss carryforwards
and $20 million of other items related to Puerto Rico. For the remainder of the net operating loss carryforwards and
other cumulative temporary differences, based on our historical record of producing taxable income and profitability,
we have concluded that future operating income will be sufficient to give rise to tax expense to recover all deferred tax
assets.
We provide for income taxes on the undistributed earnings of our Puerto Rico operations using that jurisdiction’s
tax rate, which has been lower historically than the U.S. statutory tax rate. Permanent investment of these earnings has
resulted in cumulative unrecognized deferred tax liabilities of approximately $31 million as of December 31, 2014.
We file income tax returns in the United States and certain foreign jurisdictions. The U.S. Internal Revenue Service,
or IRS, has completed its examinations of our consolidated income tax returns for 2012 and prior years. Our 2013 tax
return is in the post-filing review period under the Compliance Assurance Process (CAP). Our 2014 tax return is under
advance review by the IRS under CAP. With few exceptions, which are immaterial in the aggregate, we no longer are