Income Taxes

6 Months Ended

Jun. 30, 2021

Income Taxes [Abstract]

Income Taxes

(14) Income Taxes:

The following is a reconciliation of the provision for income taxes computed at the federal statutory rate to income taxes computed at the effective rate:

	Successor		Predecessor
	For the two months		For the four months		For the six months
	ended June 30,		ended April 30,		ended June 30,
($ in millions)	2021		2021		2020
Consolidated tax provision at federal statutory rate	21.0	%	21.0	%	21.0	%
State income tax provisions, net of federal income
tax expense (benefit)	3.7		0.5		5.4
Changes in certain deferred tax balances	-		-		(3.9)
Interest expense deduction	-		-		10.4
Restructuring cost	-		0.3		(5.0)
Loss on disposal of Northwest Operations	-		-		(8.0)
Tax reserve adjustment	0.6		-		(0.7)
Fresh start and reorganization adjustments	-		(24.9)		-
Shared-based payments	-		-		(0.3)
Federal research and development tax credit	(1.3)		-		(0.5)
All other, net	6.1		-		(0.5)
Effective tax rate	30.1	%	(3.1)	%	17.9	%

Under ASC 740 – 270, income tax expense for the four months ended April 30, 2021, is based on the actual year to date effective tax rate for the first four months of the year inclusive of the impact of the fresh start and reorganization adjustments. Income tax expense for the two months ended June 30, 2021 is based on an annual effective tax rate for the successor period with the exclusion of the discrete items.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. As part of the CARES Act, employers were allowed to defer payment of the employer’s share of the Social Security tax that they otherwise were responsible for paying on wages. The deferral applied to affected taxes that were normally required to be paid from March 27, 2020, through December 31, 2020. These deferred taxes must be paid in equal amounts in 2021 and 2022. As of June 30, 2021, Frontier has deferred the payments of approximately $60 million in such taxes.

As of June 30, 2021, and December 31, 2020, amounts pertaining to expected income tax refunds of $13 million are included in “Income taxes and other current assets” on the consolidated balance sheets, respectively.

Frontier considered positive and negative evidence in regard to evaluating certain deferred tax assets during the second quarter of 2021, including the development of recent years of pre-tax book losses. On the basis of this evaluation, a valuation allowance of $108 million ($85 million net of federal benefit) has been recorded as of April 30, 2021.

As described more fully in Note 1 and Note 3, the Company emerged from bankruptcy on April 30, 2021, and consummated a taxable disposition of substantially all of the assets and/or subsidiary stock of the Company and utilized substantially all of the Company’s Net Operating Losses (“NOLs”).