The Prudential Series Fund

Pruco Life Insurance Company
Notes to Consolidated Financial Statements
7. INCOME TAXES (continued)
The income tax expense for the years ended December 31, differs from the amount computed by applying the expected federal
income tax rate of 35% to income from operations before income taxes and cumulative effect of accounting change for the
following reasons:
2008 2007 2006
(in thousands)
Expected federal income tax expense $ 110,015 $ 109,111 $ 113,839
Non taxable investment income (43,914) (45,952) (47,030)
Tax credits (4,974) (5,203) (7,770)
Other 3,877 6,456 3,423
Total income tax expense on income from operations $ 65,004 $ 64,412 $ 62,462
Deferred tax assets and liabilities at December 31, resulted from the items listed in the following table:
2008 2007
(in thousands)
Deferred tax assets
Insurance reserves $ 202,239 $ 124,182
Net unrealized losses on securities 113,853 -
Investments - 15,371
Other 30,506 10,147
Deferred tax assets 346,598 149,700
Deferred tax liabilities
Deferred acquisition costs 710,583 582,578
Investments 195,900 -
Net unrealized gains on securities - 17,801
Other 575 1,643
Deferred tax liabilities 907,058 602,022
Net deferred tax liability $ 560,460 $ 452,322
As of December 31, 2008, the Company had no ordinary or capital losses or tax credits that are attributable to reduce taxes in
future years.
The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a
valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not to be realized.
Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such
valuation allowance. In evaluating the need for a valuation allowance the Company considers many factors, including: (1) the
nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) in which tax jurisdictions they were
generated and the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable earnings
exclusive of reversing temporary differences and carryforwards; (5) the length of time that carryovers can be utilized in the
various taxing jurisdictions; (6) any unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax
planning strategies that the Company would employ to avoid a tax benefit from expiring unused. Although realization is not
assured, management believes it is more likely than not that the deferred tax assets, net of valuation allowances, will be realized.
The Company had no valuation allowance as of December 31, 2008, 2007 and 2006.
Management believes that based on its historical pattern of taxable income, the Company and its subsidiaries will produce
sufficient income in the future to realize its deferred tax assets. Adjustments to the valuation allowance will be made if there is a
change in management’s assessment of the amount of the deferred tax asset that is realizable.
On January 1, 2007, the Company adopted FIN No. 48, ―Accounting for Uncertainty in Income Taxes,‖ an Interpretation of
FASB Statement No. 109. This interpretation prescribes a comprehensive model for how a company should recognize, measure,
present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax
return. Adoption of FIN No. 48 resulted in an increase to the Company’s income tax liability and a decrease to retained earnings
of $0.7 million as of January 1, 2007.
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