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Income Taxes
6 Months Ended
Jun. 30, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company recorded tax expense on the pre-tax net income for the three months ended June 30, 2016 of $12.4 million and tax benefit on the pre-tax net income for the three months ended June 30, 2015 of $0.8 million, which equates to an effective tax rate of 29.7% and (2.1)%, respectively, by applying the projected full year effective rate. Tax expense of $20.4 million on the pre-tax net income for the six months ended June 30, 2016 and tax expense of $0.1 million on the pre-tax net loss for the six months ended June 30, 2015 equates to an effective tax rate of 29.9% and (1.6)%, respectively, by applying the projected full year effective rate. For 2016, the projected annual effective tax rate differs from the 35% federal statutory rate primarily due to a decrease in the valuation allowance offset by tax expense related to state taxes. For 2015, the projected annual effective tax rate differs from the 35% federal statutory rate primarily due to a decrease in the valuation allowance offset by tax expense related to state taxes.
Deferred Income Taxes
At June 30, 2016, the Company had gross federal NOL carryforwards of $283.2 million. The Company's remaining federal NOL carryforwards will expire from 2019 to 2036. At June 30, 2016, the Company had a net, after attribute reduction, state NOL deferred tax asset of $12.0 million. The Company's remaining state NOL carryforwards will expire from 2016 to 2036; the amount that will expire in 2016 is negligible. At June 30, 2016, the Company had no alternative minimum tax credit carryover and had $5.1 million in state credit carryovers. Telecom Group completed an initial public offering on February 8, 2005, which resulted in an "ownership change" within the meaning of the United States of America federal income tax laws addressing NOL carryforwards, alternative minimum tax credits and other similar tax attributes. The Merger and the Company's emergence from Chapter 11 protection also resulted in ownership changes. As a result of these ownership changes, there are specific limitations on the Company's ability to use its NOL carryforwards and other tax attributes. The Company believes that it can use the NOLs even with these restrictions in place.
Valuation Allowance. At June 30, 2016 and December 31, 2015, the Company established a valuation allowance against its deferred tax assets of $23.8 million and $25.1 million, respectively, which consist of a $17.1 million and $14.7 million federal allowance, respectively, and a $6.7 million and $10.4 million state allowance, respectively.
Income Tax Returns
The Company and its eligible subsidiaries file consolidated income tax returns in the United States of America federal jurisdiction and certain consolidated, combined and separate entity tax returns, as required, with various state and local governments. Based solely on statutes of limitations, the Company would not be subject to United States of America federal, state and local, or non-United States of America income tax examinations by tax authorities for years prior to 2011. However, tax years prior to 2011 may be subject to examination by federal or state taxing authorities if the Company's NOL carryovers from those years are utilized in the future. As of June 30, 2016 and December 31, 2015, the Company does not have any significant jurisdictional income tax audits.