INCOME TAXES

Cablevision

Cablevision files a consolidated federal income tax return with its 80% or more owned subsidiaries.

Income tax expense (benefit) attributable to Cablevision's continuing operations consists of the following components:



	Years Ended December 31,
	2014			2013			2012
Current expense (benefit):
Federal	$	6,122		$	(144	)	$	(3,493	)
State	2,788			(3,510		)	19,800
	8,910			(3,654		)	16,307
Deferred expense (benefit):
Federal	135,873			69,258			48,441
State	23,906			198			(6,111		)
	159,779			69,456			42,330
Tax benefit relating to uncertain tax positions, including accrued interest	(52,921		)	(167		)	(6,643		)
Income tax expense	$	115,768		$	65,635		$	51,994

In January 2014, the Internal Revenue Service informed the Company that the consolidated federal income tax returns for 2009 and 2010 are no longer under examination. Accordingly, in the first quarter of 2014, the Company recorded an income tax benefit of $53,132 associated with the reversal of a noncurrent liability relating to an uncertain tax position from 2009. The statute of limitations with regard to 2009 expired on March 31, 2014.

Income tax expense attributable to discontinued operations for the year ended December 31, 2014 of $2,206 is comprised of current and deferred income tax expense of $108 and $2,098, respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2013 of $232,807 is comprised of current and deferred income tax expense of $18,120 and $214,687, respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2012 of $110,581 is comprised of current and deferred income tax expense of $5,340 and $105,241, respectively.



The income tax expense attributable to Cablevision's continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:
	Years Ended December 31,
	2014			2013			2012
Federal tax expense at statutory rate	$	148,803		$	67,536		$	44,212
State income taxes, net of federal benefit	19,059			3,607			4,763
Changes in the valuation allowance	(344		)	5,631			5,480
Changes in the state apportionment rates used to measure deferred taxes, net of federal benefit	(322		)	(11,228		)	2,273
Tax benefit relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	(52,914		)	(124		)	(2,659		)
Impact of New York State tax reform enacted on March 31, 2014	(2,050		)	—			—
Impact of non-deductible officers' compensation	1,532			796			470
Other non-deductible expenses	3,697			3,628			3,363
Increase in the deferred tax asset for certain state tax loss carry forwards pursuant to LLC conversions of certain subsidiaries	—			—			(3,935		)
Research credit	(2,634		)	(3,739		)	—
Tax benefit from exclusion of pretax income of an entity that is not consolidated for income tax purposes	—			—			(2,605		)
Other, net	941			(472		)	632
Income tax expense	$	115,768		$	65,635		$	51,994

For Cablevision, the tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2014 and 2013 are as follows:



	December 31,
	2014			2013
Deferred Tax Asset (Liability)
Current
NOLs and tax credit carry forwards	$	144,833		$	224,968
Compensation and benefit plans	74,220			44,629
Allowance for doubtful accounts	4,557			5,502
Other liabilities	4,909			13,389
Deferred tax asset	228,519			288,488
Valuation allowance	(3,496		)	(6,988		)
Net deferred tax asset, current	225,023			281,500

Investments	(159,475		)	(97,565		)
Prepaid expenses	(27,605		)	(24,111		)
Deferred tax liability, current	(187,080		)	(121,676		)

Net deferred tax asset, current	37,943			159,824

Noncurrent
NOLs and tax credit carry forwards	25,427			65,322
Compensation and benefit plans	99,076			106,595
Newsday Holdings and other partnership investments	123,243			132,384
Investments	22,294			—
Other	7,345			4,896
Deferred tax asset	277,385			309,197
Valuation allowance	(3,901		)	(7,488		)
Net deferred tax asset, noncurrent	273,484			301,709

Fixed assets and intangibles	(884,120		)	(840,375		)
Investments	—			(29,563		)
Other	(452		)	(1,827		)
Deferred tax liability, noncurrent	(884,572		)	(871,765		)

Net deferred tax liability, noncurrent	(611,088		)	(570,056		)

Total net deferred tax liability	$	(573,145	)	$	(410,232	)

At December 31, 2014, Cablevision had consolidated federal net operating loss carry forwards ("NOLs") of $619,955 expiring on various dates from 2024 through 2031. Cablevision has recorded a deferred tax asset related to $241,005 of such NOLs. A deferred tax asset has not been recorded for the remaining NOL of $378,950 as this portion relates to 'windfall' deductions on share-based awards that have not yet been realized. Cablevision uses the 'with-and-without' approach to determine whether an excess tax benefit has been realized. Upon realization, such excess tax benefits are recorded as an increase to paid-in capital. Cablevision realized excess tax benefit of $336 and $1,280 during the years ended December 31, 2014 and 2013, respectively, resulting in an increase to paid-in capital.

As of December 31, 2014, Cablevision has $39,919 of federal alternative minimum tax credit carry forwards which do not expire.

As of December 31, 2014, Cablevision has $14,818 of research credits, expiring in varying amounts from 2023 through 2034.

Subsequent to the utilization of Cablevision's NOLs and tax credit carry forwards, payments for income taxes are expected to increase significantly.

CSC Holdings

CSC Holdings and its 80% or more owned subsidiaries are included in the consolidated federal income tax returns of Cablevision. The income tax provision for CSC Holdings is determined on a stand-alone basis for all periods presented as if CSC Holdings filed separate consolidated income tax returns.

Income tax expense (benefit) attributable to continuing operations consists of the following components:



	Years Ended December 31,
	2014			2013			2012
Current expense:
Federal	$	189,609		$	66,800		$	47,250
State	46,573			21,579			39,561
	236,182			88,379			86,811
Deferred expense (benefit):
Federal	35,445			89,832			79,731
State	17,744			10,035			(7,352		)
	53,189			99,867			72,379
Tax benefit relating to uncertain tax positions, including accrued interest	(52,921		)	(167		)	(6,643		)
Income tax expense	$	236,450		$	188,079		$	152,547

Income tax expense attributable to discontinued operations for the year ended December 31, 2014 of $2,206 is comprised of current income tax expense and deferred income tax benefit of $2,479 and $(273), respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2013 of $240,412 is comprised of current income tax expense and deferred income tax benefit of $299,353 and $(58,941), respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2012 of $110,581 is comprised of current and deferred income tax expense of $28,242 and $82,339, respectively.

In connection with the tax allocation policy between CSC Holdings and Cablevision, CSC Holdings decreased the affiliate receivable due from Cablevision and increased the affiliate payable due to Cablevision by $230,786 in the aggregate, representing the estimated current income tax liability of CSC Holdings for the year ended December 31, 2014 as determined on a stand-alone basis, partially offset by an excess tax benefit realized of $4,978 and current income tax liabilities that are payable by CSC Holdings of $2,897.

The income tax expense attributable to CSC Holdings' continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:



	Years Ended December 31,
	2014			2013			2012
Federal tax expense at statutory rate	$	243,740		$	167,098		$	132,864
State income taxes, net of federal benefit	42,769			27,177			22,542
Changes in the valuation allowance	(382		)	(101		)	1,038
Changes in the state apportionment rates used to measure deferred taxes, net of federal benefit	379			(6,484		)	1,188

Tax benefit relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	(52,914		)	(124		)	(2,659		)
Impact of New York State tax reform enacted on March 31, 2014	(1,502		)	—			—
Impact of non-deductible officers' compensation, net	1,532			796			470
Other non-deductible expenses	3,697			3,628			3,363
Increase in the deferred tax asset for certain state tax loss carry forwards pursuant to LLC conversions of certain subsidiaries	—			—			(3,935		)
Research credit	(2,634		)	(3,739		)	—
Tax benefit from exclusion of pretax income of an entity that is not consolidated for income tax purposes	—			—			(2,605		)
Other, net	1,765			(172		)	281
Income tax expense	$	236,450		$	188,079		$	152,547

For CSC Holdings, the tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2014 and 2013 are as follows:



	December 31,
	2014			2013
Deferred Tax Asset (Liability)
Current
Compensation and benefit plans	$	74,220		$	44,629
Allowance for doubtful accounts	4,557			5,502
Other liabilities	4,909			13,389
Deferred tax asset	83,686			63,520
Valuation allowance	(1,891		)	(2,426		)
Net deferred tax asset, current	81,795			61,094
Investments	(159,475		)	(97,565		)
Prepaid expenses	(27,605		)	(24,111		)
Deferred tax liability, current	(187,080		)	(121,676		)

Net deferred tax liability, current	(105,285		)	(60,582		)
Noncurrent
Tax credit carry forwards	11,702			20,137
Compensation and benefit plans	99,076			106,595
Newsday Holdings and other partnership investments	123,243			132,384
Investments	22,294			—
Other	7,345			4,896
Deferred tax asset	263,660			264,012
Valuation allowance	(5,454		)	(10,084		)
Net deferred tax asset, noncurrent	258,206			253,928

Fixed assets and intangibles	(884,120		)	(840,375		)
Investments	—			(29,563		)
Other	(453		)	(1,827		)
Deferred tax liability, noncurrent	(884,573		)	(871,765		)

Net deferred tax liability, noncurrent	(626,367		)	(617,837		)

Total net deferred tax liability	$	(731,652	)	$	(678,419	)

CSC Holdings uses the 'with-and-without' approach to determine whether an excess tax benefit has been realized with regard to 'windfall' deductions on share-based payment awards. Upon realization, the excess tax benefits are recorded as an increase to member's equity. On a stand-alone basis, CSC Holdings realized federal and state excess tax benefit of $4,978, $46,164 and $61,434 during the years ended December 31, 2014, 2013 and 2012, respectively. Such excess tax benefit resulted in an increase to member's equity.

The Company

Deferred tax assets have resulted primarily from the Company's future deductible temporary differences and NOLs. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company's ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income and tax planning strategies to allow for the utilization of its NOLs and deductible temporary differences. If such estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's consolidated statements of income. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. At this time, based on current facts and circumstances, management believes that it is more likely than not that the Company will realize benefit for its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs.

In the normal course of business, the Company engages in transactions in which the income tax consequences may be uncertain. The Company's income tax returns are filed based on interpretation of tax laws and regulations. Such income tax returns are subject to examination by taxing authorities. For financial statement purposes, the Company only recognizes tax positions that it believes are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken or expected to be taken on the tax return are more likely than not of being sustained.

A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest, is as follows:



Balance at December 31, 2013	$	57,407
Increases related to prior year tax positions	58
Decreases related to prior year tax positions	(53,460		)
Increases related to current year tax positions	6
Balance at December 31, 2014	$	4,011

As of December 31, 2014, if all uncertain tax positions were sustained at the amounts reported or expected to be reported in the Company's tax returns, the elimination of the Company's unrecognized tax benefits, net of the deferred tax impact, would decrease income tax expense by $2,608.

Interest expense related to uncertain tax positions is included in income tax expense, consistent with the Company's historical policy. After considering the associated deferred tax benefit, interest expense (income) of $284, $107 and $(377) has been included in income tax expense attributable to continuing operations in the consolidated statements of income for 2014, 2013 and 2012, respectively. At December 31, 2014, accrued interest on uncertain tax positions of $268 and $2,975 was included in accrued liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet.

The most significant jurisdictions in which the Company is required to file income tax returns include the states of New York, New Jersey and Connecticut and the City of New York. The State of New York is presently auditing income tax returns for years 2006 through 2011.

Management does not believe that the resolution of the ongoing income tax examination described above will have a material adverse impact on the financial position of the Company. Changes in the liabilities for uncertain tax positions will be recognized in the interim period in which the positions are effectively settled or there is a change in factual circumstances.