Income Taxes

9 Months Ended

Sep. 30, 2022

Income Taxes [Abstract]

Income Taxes

‎

(12) 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 three months ended September 30,		For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
	2022		2022		2021		2021
Consolidated tax provision at federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
State income tax expense, net of federal
income tax benefit	14.7		13.1		2.8		0.5
Changes in certain deferred tax balances	2.1		1.5		-		-
Restructuring cost	-		-		-		0.3
Fresh start and reorganization adjustments	-		-		-		(24.9)
Sec.162(m) - nondeductible Executive Compensation	1.5		2.5		-		-
All other, net	(0.8)		(0.3)		0.9		-
Effective tax rate	38.5	%	37.8	%	24.7	%	(3.1)	%

Frontier considered positive and negative evidence in regard to evaluating certain state deferred tax assets during the third quarter of 2022, including the development of recent years of pre-tax book losses. On the basis of this evaluation, a valuation allowance of $77 million ($61 million net of federal benefit) was recorded as of September 30, 2022.

The effective rate for the three and nine months ended September 30, 2022, increased as a result of increases to the state rate due to valuation allowances in certain states, arising from non-deductible interest expense primarily related to our $1.2 billion first lien note issuance.

The effective rate changes between the three and nine months ended September 30, 2022, as compared to 2021 are primarily due to, as described more fully in Note 1, the Company emergence from bankruptcy on April 30, 2021, and consummation of 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”).

The Inflation Reduction Act was signed into law on August 16, 2022.  The law contains numerous changes to tax laws effective January 1, 2023.  The Company is currently evaluating the effects, if any, of these changes.