Note 12 - Income Taxes

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12.     Income Taxes

For the three and nine-month periods ended September 30, 2020 and 2019, our income tax expense and effective income tax rates were as follows (dollars in millions):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Income tax expense	$	43		$	23		$	67		$	44
Effective income tax rate		26	%		28	%		26	%		34	%

We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each quarter is based upon these full year projections, which are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits to adjust our statutory Federal income tax rate of 21% to our effective income tax rate. For the nine-month period ended September 30, 2020, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 26% as follows: state income taxes added 4% and permanent differences between our U.S. GAAP income and taxable income added 1%. For the nine-month period ended September 30, 2019, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 34% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income added 2% and divestiture of component 2 goodwill resulted in an increase of 6%.

We made income tax payments (net of refunds) of approximately $50 million and $12 million during the nine-months ended September 30, 2020 and 2019, respectively.

We have approximately $438 million of federal operating loss carryforwards, that expire during the years 2023 through 2037. We expect to have federal taxable income in the carryforward periods, therefore we believe that these federal operating loss carryforwards will be fully utilized. Additionally, we have an aggregate of approximately $677 million of various state operating loss carryforwards, of which we expect approximately half will be utilized.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020, and permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. We will continue to monitor and assess the impact the CARES Act may have on our business and financial results. We do not currently expect the CARES Act to have a material impact on our annual estimated effective tax rate.