Income Taxes

Components of (Loss)/Income Before Income Taxes



	Years Ended December 31,
(In millions)	2013			2012			2011
United States	$	(4,652.0	)	$	(2,341.9	)	$	(1,271.5	)
Outside of the U.S.	192.5			83.2			5.5
	$	(4,459.5	)	$	(2,258.7	)	$	(1,266.0	)

Income Tax (Benefit)/Provision



	Years Ended December 31,
(In millions)	2013			2012			2011
United States
Current
Federal	$	(6.4	)	$	(72.0	)	$	(1.0	)
State	(82.6		)	5.6			(16.4		)
Deferred
Federal	(1,421.4		)	(726.7		)	(450.6		)
State	(51.2		)	(87.1		)	(70.1		)
Outside of the U.S.
Current	28.5			13.0			8.8
Deferred	(16.6		)	(3.3		)	(5.3		)
	$	(1,549.7	)	$	(870.5	)	$	(534.6	)

Allocation of Income Tax (Benefit)/Provision



	Years Ended December 31,
(In millions)	2013			2012			2011
Income tax (benefit)/provision applicable to:
Loss from continuing operations, before income taxes	$	(1,549.7	)	$	(870.5	)	$	(534.6	)
Discontinued operations	0.2			50.1			27.8
Accumulated other comprehensive income/(loss)	15.9			10.9			70.9
Retained earnings	—			—			6.0
Additional paid in capital	14.5			(2.1		)	11.6

The tax provision of $70.9 million allocated to accumulated other comprehensive income/(loss) in 2011 was primarily comprised of $117.3 million related to the reclassification of losses on derivative instruments from accumulated other comprehensive loss to interest expense, offset by tax benefits of $28.4 million related to the change in fair market value of derivatives and $19.2 million related to foreign currency translation adjustments. The tax impact for the components of accumulated other comprehensive income/(loss) in 2012 was immaterial both individually and in the aggregate. The tax provision of $15.9 million in 2013 was primarily related to foreign currency translation adjustments.

Effective Income Tax Rate Reconciliation



	Years Ended December 31,
	2013		2012		2011
Statutory tax rate	35.0	%	35.0	%	35.0	%
Increases/(decreases) in tax resulting from:
State taxes, net of federal tax benefit	6.4		4.4		8.7
Valuation allowance	(9.5	)	(2.3	)	(6.8	)
Foreign income taxes	0.1		—		2.4
Goodwill	(0.4	)	(1.4	)	0.1
Stock based compensation	(0.2	)	(0.2	)	—
Officers’ life insurance/insurance proceeds	—		0.1		(0.3	)
Acquisition and integration costs	0.1		(0.2	)	—
Reserves for uncertain tax positions	—		3.1		(0.2	)
Deferred tax liability adjustment	—		—		3.3
Capital loss tax benefit	4.0		—		—
CGP LLC transaction deferred tax adjustment	(0.8	)	—		—
Other	—		—		—
Effective tax rate	34.7	%	38.5	%	42.2	%

Temporary Differences Resulting in Deferred Tax Assets and Liabilities



(In millions)	2013		2012
Deferred tax assets:
State net operating losses	$	252.8	$	180.3
Foreign net operating losses	24.3		37.8
Federal net operating loss	1,280.9		850.2
Compensation programs	141.5		120.6
Allowance for doubtful accounts	76.4		87.6
Self-insurance reserves	16.4		15.7
Accrued expenses	44.4		44.6
Federal tax credits	34.7		33.7
Federal indirect tax benefits of uncertain state tax positions	27.2		52.8
Outside basis difference in foreign subsidiaries	—		61.5
Investment in CGP LLC	23.4		—
Investments in non-consolidated affiliates	38.7		—
Capital loss carryover	136.4		—
Deferred revenue	41.2		2.0
Other	10.3		18.6
Subtotal	2,148.6		1,505.4
Less: valuation allowance	739.5		330.0
Total deferred tax assets	1,409.1		1,175.4

Deferred tax liabilities:
Depreciation and other property-related items	1,188.9		2,241.7
Deferred cancellation of debt income and other debt-related items	1,833.6		1,913.4
Management and other contracts	—		3.9
Intangibles	1,118.1		1,255.7
Prepaid expenses	25.0		28.3
Investments in non-consolidated affiliates	—		3.5
Total deferred tax liabilities	4,165.6		5,446.5
Net deferred tax liability	$	2,756.5	$	4,271.1

Deferred Tax Assets and Liabilities Presented in our Consolidated Balance Sheets



(In millions)	2013		2012
Assets:
Deferred income taxes (current)	$	8.7	$	114.9
Liabilities:
Deferred income taxes (current)	289.2		$	—
Liabilities held for sale (non-current)	—		51.9
Deferred income taxes (non-current)	2,476.0		4,334.1
Net deferred tax liability	$	2,756.5	$	4,271.1

As a result of certain realization requirements of ASC Topic 718, Compensation - Stock Compensation ("ASC Topic 718"), the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2013, and December 31, 2012 that arose directly from tax deductions related to equity compensation that are greater than the compensation recognized for financial reporting. Equity will be increased by $2.4 million if and when such deferred tax assets are ultimately realized. The Company uses ASC Topic 740, Income Taxes ("ASC Topic 740"), ordering when determining when excess tax benefits have been realized.

As of December 31, 2013 and 2012, the Company had federal net operating loss ("NOL") carryforwards of $3,654.7 million and $2,418.2 million, respectively. These NOLs will begin to expire in 2029. The federal NOL carryforwards per the income tax returns filed included unrecognized tax benefits taken in prior years. Due to application of ASC Topic 740, the federal NOL carryforwards reflected in the income tax returns, as filed, are larger than the NOLs for which a deferred tax asset is recognized for financial statement purposes. In addition, the Company had federal general business tax credits carryforwards of $27.5 million which will begin to expire in 2029. As of December 31, 2013, although no valuation allowance has been established for the Company’s federal NOL carryforwards or general business tax credits carryforwards deferred tax assets, the Company has provided a valuation allowance against certain other federal deferred tax assets that were not deemed realizable based upon near term estimates of future taxable income. Should the Company continue to experience operating losses of the same magnitude it has experienced in the past several years, it is reasonably possible in the near term that the future reversal of its U.S. federal deductible temporary differences could exceed the future reversal of its U.S. federal taxable temporary differences, in which case the Company would record a valuation allowance for such excess with a corresponding reduction of federal income tax benefit on its Consolidated Statements of Operations.

As of December 31, 2013, the Company had a federal capital loss carryforward of $370.5 million which will expire in 2018. The Company does not project having sufficient capital gains in future years in order to utilize these capital loss carryovers. As such, a full valuation allowance has been provided for the capital loss carryover in 2013.

NOL carryforwards for the Company’s subsidiaries for state income taxes were $6,500.7 million and $5,976.8 million as of December 31, 2013 and 2012, respectively. The state NOL carryforwards per the income tax returns filed included unrecognized tax benefits taken in prior years. Due to application of ASC Topic 740, they are larger than the NOLs for which a deferred tax asset is recognized for financial statement purposes. We believe that it is more likely than not that the benefit from certain state NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $336.5 million on the deferred tax assets relating to these NOL carryforwards and other state deferred tax assets which will not more likely than not be realized. We anticipate that state NOLs in the amount of $22.7 million will expire in 2014. The remainder of the state NOLs will expire between 2015 and 2033.

NOL carryforwards of the Company’s foreign subsidiaries were $118.9 million and $162.4 million as of December 31, 2013 and 2012, respectively. The majority of these foreign NOLs have an indefinite carryforward period but are subject to a full valuation allowance as the Company believes these assets do not meet the "more likely than not" criteria for recognition under ASC Topic 740.

As of December 31, 2013 and 2012, the Company had foreign tax credit carryforwards of $7.2 million and $12.3 million, respectively. During 2013, the Company amended its 2006 federal tax return to deduct $12.4 million of the foreign tax credits which were projected to expire in 2015. In 2013, the Company amended its 2007 federal tax return to claim $12.6 million of foreign tax credits which were projected to expire in 2015. The remaining foreign tax credit carryforwards of $7.2 million is projected to expire unused in 2015 as the Company does not project to have sufficient future foreign source income in order to utilize these carryforwards. As such, the Company has provided a full valuation allowance against the foreign tax credit carryforward deferred tax asset.

We do not provide for deferred taxes on the excess of the financial reporting over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration. That excess is estimated to total $110.3 million as of December 31, 2013. The additional deferred taxes, including foreign withholding taxes, that have not been provided is estimated at $13.3 million as of December 31, 2013.

Reconciliation Unrecognized Tax Benefits



	Years Ended December 31,
(In millions)	2013			2012			2011
Balance at beginning of year	$	333.4		$	532.3		$	567.4
Additions based on tax positions related to the current year	0.8			9.5			4.2
Additions for tax positions of prior years	6.7			3.3			2.0
Reductions for tax positions for prior years	(50.5		)	(203.7		)	(36.4		)
Settlements	(81.6		)	(7.9		)	—
Expiration of statutes	(66.5		)	(0.1		)	(4.9		)
Balance at end of year	$	142.3		$	333.4		$	532.3

We classify reserves for tax uncertainties within accrued expenses and deferred credits and other in our Consolidated Balance Sheets, separate from any related income tax payable or deferred income taxes. In accordance with ASC 740, reserve amounts relate to any potential income tax liabilities resulting from uncertain tax positions as well as potential interest or penalties associated with those liabilities. The reduction for tax positions from prior years in 2013, the settlements in 2013, and the expiration of statutes in 2013 primarily relate to the completion of several state audits encompassing numerous tax years. The Company recognized tax benefits through the reduction of tax expense of approximately $51.4 million related to the movement in uncertain tax positions.

We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. We accrued approximately $19 million during 2011, and we reduced our accrual by approximately $10 million and $8.0 million during 2013 and 2012, respectively. In total, we have accrued balances of approximately $63 million, $73 million, and $80 million for the payment of interest and penalties at December 31, 2013, 2012 and 2011, respectively. Included in the balances of unrecognized tax benefits as of December 31, 2013, 2012 and 2011, are approximately $91 million, $219 million, and $287 million, respectively, of unrecognized tax benefits that, if recognized, would impact the effective tax rate.

We file income tax returns, including returns for our subsidiaries, with federal, state, and foreign jurisdictions. We are subject to exam by various state and foreign tax authorities. As of December 31, 2013, the tax years prior to 2010 are not subject to examination for U.S. tax purposes. As of December 31, 2013, the tax years prior to 2010 are no longer subject to examination for foreign and state income tax purposes as the statutes of limitations have lapsed.

The Company believes that it is reasonably possible that the unrecognized tax benefits liability will decrease within the next 12 months by $66.4 million due to state statute of limitations expirations during 2014. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although the Company believes that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on our earnings. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a favorable impact on earnings.