Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of components of provision for income tax



	Years Ended December 31,
	2018			2017		2016
	(Dollars in millions)
Income tax expense (benefit) was as follows:
Federal
Current	$	(576	)	82		335
Deferred	734			(988	)	5
State
Current	(22		)	21		27
Deferred	52			16		8
Foreign
Current	36			22		26
Deferred	(54		)	(2	)	(7	)
Total income tax expense (benefit)	$	170		(849	)	394



	Years Ended December 31,
	2018			2017		2016
	(Dollars in millions)
Income tax (benefit) expense was allocated as follows:
Income tax (benefit) expense in the consolidated statements of operations:
Attributable to income	$	170		(849	)	394
Stockholders' equity:
Compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes	—			—		(2	)
Tax effect of the change in accumulated other comprehensive loss	(2		)	81		(109	)

Schedule of reconciliation of the statutory federal income tax rate to effective income tax rate

The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:



	Years Ended December 31,
	2018		2017		2016
	(Percentage of pre-tax income)
Statutory federal income tax rate	21.0	%	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	(1.5	)%	3.9	%	2.3	%
Impairment of goodwill	(36.6	)%	—	%	—	%
Change in liability for unrecognized tax position	1.3	%	1.0	%	0.2	%
Tax reform	(5.9	)%	(209.8	)%	—	%
Net foreign income taxes	1.8	%	(0.7	)%	0.1	%
Foreign dividend paid to a domestic parent company	—	%	0.2	%	1.8	%
Research and development credits	0.9	%	(1.4	)%	(0.6	)%
Tax impact on sale of data centers and colocation business	—	%	5.0	%	—	%
Tax benefit of net operating loss carryback	9.1	%	—	%	—	%
Level 3 acquisition transaction costs	—	%	6.0	%	—	%
Other, net	(1.0	)%	3.6	%	(0.2	)%
Effective income tax rate	(10.9	)%	(157.2	)%	38.6	%

Schedule of components of deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:



	As of December 31,
	2018			2017
	(Dollars in millions)
Deferred tax assets
Post-retirement and pension benefit costs	$	1,111		1,321
Net operating loss carryforwards	3,445			3,951
Other employee benefits	162			112
Other	553			714
Gross deferred tax assets	5,271			6,098
Less valuation allowance	(1,331		)	(1,341	)
Net deferred tax assets	3,940			4,757
Deferred tax liabilities
Property, plant and equipment, primarily due to depreciation differences	(3,011		)	(2,935	)
Goodwill and other intangible assets	(3,303		)	(3,785	)
Other	(23		)	(16	)
Gross deferred tax liabilities	(6,337		)	(6,736	)
Net deferred tax liability	$	(2,397	)	(1,979	)

Summary of NOLs

If unused, the NOLs will expire between 2022 and 2037. The U.S. federal net operating loss carryforwards expire as follows:



Expiring	Amount
December 31,	(Dollars in millions)
2022	$	1,043
2023	1,440
2024	1,402
2025	1,042
2026	1,525
2027	375
2028	637
2029	645
2030	671
2031	732
2032	348
2033	238
2037	2,715
NOLs per return	12,813
Uncertain tax positions	(5,526		)
Financial NOLs	$	7,287

Summary of the reconciliation of the change in gross unrecognized tax benefits

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2018 and 2017 is as follows:



	2018			2017
	(Dollars in millions)
Unrecognized tax benefits at beginning of year	$	40		16
Assumed in the acquisition of Level 3	—			18
Tax position of prior periods netted against deferred tax assets	1,338			2
Increase in tax positions taken in the current year	4			1
Increase in tax positions taken in the prior year	211			3
Decrease due to payments/settlements	(1		)	—
Decrease from the lapse of statute of limitations	(2		)	—
Decrease due to the reversal of tax positions taken in a prior year	(3		)	—
Unrecognized tax benefits at end of year	$	1,587		40