Income Taxes (Notes)

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

All of Charter’s operations are held through Charter Holdco and its direct and indirect subsidiaries. Prior to July 2, 2015, Charter Holdco was treated as a partnership for tax purposes. Effective on July 2, 2015, Charter elected to treat two of its wholly owned subsidiaries as disregarded entities for federal and state income tax purposes (the “Election”).  The subsidiaries that made the Election are two of the three partners in Charter Holdco. This Election resulted in a deemed liquidation of Charter Holdco into Charter solely for federal and state income tax purposes, and resulted in a net increase of $645 million to the tax basis of Charter Holdco's amortizable and depreciable assets. After the Election, all taxable income, gains, losses, deductions and credits of Charter Holdco and its indirect limited liability company subsidiaries will be treated as income of Charter. In addition, the indirect subsidiaries of Charter Holdco that are corporations joined the Charter consolidated group. The impact of the Election to the Charter income tax provision, net of valuation allowance, was $169 million income tax benefit recorded as a discrete tax event during the three months ended September 30, 2015.

For the three and nine months ended September 30, 2015, the Company recorded $142 million and $72 million of income tax benefit, respectively. For the three and nine months ended September 30, 2014, the Company recorded $59 million and $188 million of income tax expense, respectively. The income tax benefit recognized during the three and nine months ended September 30, 2015 was primarily the result of the deemed liquidation of Charter Holdco. Income tax expense (benefit) is generally recognized primarily through increases (decreases) in deferred tax liabilities related to Charter’s franchises which are characterized as indefinite-lived for book financial reporting purposes, as well as to a lesser extent through current federal and state income tax expense.

As of September 30, 2015 and December 31, 2014, the Company had net deferred income tax liabilities of approximately $1.6 billion. Included in net deferred income tax liabilities are net current deferred tax assets of $37 million and $26 million as of September 30, 2015 and December 31, 2014, respectively, which are included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets of the Company. Net deferred tax liabilities included approximately $20 million and $236 million at September 30, 2015 and December 31, 2014, respectively, relating to certain indirect subsidiaries that file separate income tax returns.  The decrease in net deferred tax liabilities relating to certain indirect subsidiaries is a result of Charter Holdco’s indirect subsidiaries that are corporations joining the Charter consolidated group as noted above in connection with the Election. Following the Election, the remaining indirect subsidiary deferred tax balances represent only certain state jurisdictions.

In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits. There is considerable judgment involved in making such a determination.  The Company did not have any unrecognized tax benefits as of September 30, 2015 or December 31, 2014.

No tax years for Charter or Charter Holdco, for income tax purposes, are currently under examination by the IRS.  Tax years ending 2012 through 2014 remain subject to examination and assessment. Years prior to 2012 remain open solely for purposes of examination of Charter’s loss and credit carryforwards.