Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Components of income tax expense (benefit)

The following table summarizes the income tax provision attributable to loss from continuing operations before income taxes for each of the three years ended December 31, 2013, 2012 and 2011:



	2013			2012			2011
(dollars in millions)
Current:
United States federal	$	9		$	—		$	—
State	(1		)	(2		)	—
Foreign	(37		)	(36		)	(8		)
	(29		)	(38		)	(8		)
Deferred, net of changes in valuation allowances:
United States federal	(3		)	(3		)	(30		)
State	—			—			(1		)
Foreign	(6		)	(7		)	(2		)
Income tax provision	$	(38	)	$	(48	)	$	(41	)

Schedule of income before income tax, domestic and foreign

The United States and Foreign components of loss from continuing operations before income taxes for each of the three years ended December 31, 2013, 2012 and 2011 are as follows:



	2013			2012			2011
(dollars in millions)
United States	$	(122	)	$	(434	)	$	(692	)
Foreign	51			60			(94		)
	$	(71	)	$	(374	)	$	(786	)

Schedule of effective income tax rate reconciliation

A reconciliation of the actual income tax provision and the tax computed by applying the U.S. federal rate (35%) to the loss before income taxes for each of the three years ended December 31, 2013, 2012 and 2011 is shown in the following table:



	2013			2012			2011
	(dollars in millions)
Computed tax benefit at statutory rate	$	25		$	131		$	275
Effect of earnings in jurisdictions outside of US	12			25			(13		)
Change in valuation allowance	(27		)	(145		)	(213		)
Permanent items	(44		)	(48		)	(44		)
Indefinite-lived assets	(3		)	(3		)	(26		)
Uncertain tax positions	9			(3		)	(1		)
Changes in tax rates	(7		)	(4		)	(3		)
Other, net	(3		)	(1		)	(16		)
Income tax provision	$	(38	)	$	(48	)	$	(41	)

Deferred tax assets and liabilities

The components of the net deferred tax assets (liabilities) as of December 31, 2013 and 2012 are as follows:



	2013			2012
	(dollars in millions)
Deferred Tax Assets:
Accrued payroll and related benefits	$	132		$	119
Deferred revenue	336			271
Unutilized tax net operating loss carry forwards	4,791			4,611
Fixed assets and intangible assets	102			134
Intercompany loss	139			148
Other	144			162
Total Deferred Tax Assets	5,644			5,445
Deferred Tax Liabilities:
Fixed assets and intangible assets	(790		)	(702		)
Deferred revenue	(76		)	(87		)
Other	(33		)	(45		)
Foreign branch income	(163		)	(37		)
Total Deferred Tax Liabilities	(1,062		)	(871		)
Net Deferred Tax Assets before valuation allowance	4,582			4,574
Valuation Allowance	(4,698		)	(4,697		)
Net Deferred Tax Liability after Valuation Allowance	$	(116	)	$	(123	)
Balance sheet classification of deferred taxes:
Net current deferred income tax asset	$	9		$	9
Net current deferred income tax liability	(2		)	(3		)
Net non-current deferred income tax asset	211			219
Net non-current deferred income tax liability	(334		)	(348		)
Net Deferred Tax Liability after Valuation Allowance	$	(116	)	$	(123	)

Operating loss carryforwards

As of December 31, 2013, the Company had net operating loss carry forwards of approximately $9.1 billion (net of IRC Section 382 limitation) for U.S. federal income tax purposes. These loss carry forwards expire in future years through 2033 and are subject to examination by the tax authorities until three years after the carry forwards are utilized. The U.S. federal tax loss carry forwards expire as follows (dollars in millions):



Expiring December 31,	Amount
2023	$	220
2024	1,302
2025	1,186
2026	1,064
2027	1,644
2028	482
2029	694
2030	687
2031	832
2032	726
2033	221
	$	9,058

Uncertain tax benefits

A reconciliation of the beginning and ending balance of unrecognized tax benefits follows (dollars in millions):



	Amount
Balance as of January 1, 2011	$	6
Gross increases - Global Crossing tax positions of prior years	11
Gross decreases - tax positions of prior years	(1		)
Gross decreases - settlement with taxing authorities	(1		)
Balance as of December 31, 2011	15
Gross increases - tax positions of prior years	4
Gross increases - tax positions during 2012	1
Gross decreases - lapse of statute of limitations	(1		)
Gross decreases - settlement with taxing authorities	(1		)
Balance as of December 31, 2012	18
Gross increases - tax positions of prior years	—
Gross increases - tax positions during 2013	1
Gross decreases - lapse of statute of limitations	(6		)
Gross decreases - settlement with taxing authorities	—
Balance as of December 31, 2013	$	13

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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