XML 72 R20.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
INCOME TAXES
 12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
INCOME TAXES
12. INCOME TAXES:
 
The (benefit) provision for income taxes consisted of the following for the years ended December 31, 2019, 2018, and 2017 (in millions):
 
 
2019
 
2018
 
2017
Current (benefits) provision for income taxes:
 

 
 

 
 

Federal
$
(89
)
 
$
59

 
$
77

State
(2
)
 
8

 
7

 
(91
)
 
67

 
84

Deferred (benefit) provision for income taxes:
 

 
 

 
 

Federal
(4
)
 
(69
)
 
(196
)
State
(1
)
 
(34
)
 
37

 
(5
)
 
(103
)
 
(159
)
(Benefit) provision for income taxes
$
(96
)
 
$
(36
)
 
$
(75
)

 
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision:
 
2019
 
2018
 
2017
Federal statutory rate
21.0
 %
 
21.0
 %
 
35.0
 %
Adjustments:
 

 
 

 
 

Federal tax credits (a)
(684.6
)%
 
(19.9
)%
 
(2.2
)%
Spectrum sales (b)
(386.7
)%
 
(5.8
)%
 
—
 %
Valuation allowance (c)
(237.1
)%
 
0.7
 %
 
—
 %
Nondeductible items (d)
192.7
 %
 
0.4
 %
 
1.7
 %
Noncontrolling interest (e)
(138.9
)%
 
(0.3
)%
 
(0.8
)%
Change in unrecognized tax benefits (f)
72.2
 %
 
—
 %
 
0.5
 %
State income taxes, net of federal tax benefit (g)
56.6
 %
 
(8.8
)%
 
5.2
 %
Effect of consolidated VIEs (h)
46.3
 %
 
1.6
 %
 
1.0
 %
Capital loss carryback (i)
(26.0
)%
 
—
 %
 
—
 %
Stock-based compensation
(15.9
)%
 
0.5
 %
 
(0.2
)%
Federal tax reform (j)
—
 %
 
(1.4
)%
 
(54.3
)%
Other
(3.0
)%
 
0.3
 %
 
(1.0
)%
Effective income tax rate
(1,103.4
)%
 
(11.7
)%
 
(15.1
)%
 

(a)
Our 2019, 2018, and 2017 income tax provisions include a benefit of $57 million, $58 million, and $8 million, respectively, related to investments in sustainability initiatives whose activities qualify for federal income tax credits through 2021.
(b)
Our 2019 and 2018 income tax provisions include a benefit of $34 million and $18 million, respectively, related to the treatment of the gain from the sale of certain broadcast spectrum in connection with the Broadcast Incentive Auction.
(c)
Our 2019 income tax provision includes a $16 million benefit related to a release of valuation allowance on certain state net operating losses where utilization is now expected as a result of the RSN Acquisition.
(d)
Our 2019 income tax provision includes a $19 million addition primarily related to regulatory costs, executive compensation and other nondeductible expenses.
(e)
Our 2019 income tax provision includes a $12 million benefit related to noncontrolling interest of various partnerships.
(f)
Our 2019 income tax provision includes a $4 million addition related to tax positions of prior tax years.
(g)
Included in state income taxes are deferred income tax effects related to certain acquisitions, intercompany mergers and/or impact of changes in apportionment.
(h)
Certain of our consolidated VIEs incur expenses that are not attributable to non-controlling interests because we absorb certain related losses of the VIEs.  These expenses are nondeductible by us, and since these VIEs are treated as pass-through entities for income tax purposes, deferred income tax benefits are not recognized.
(i)
Our 2019 income tax provision includes a $2 million benefit related to capital losses that will be carried back to tax years with 35% federal income tax rate.
(j)
Our 2018 and 2017 income tax provisions include a non-recurring benefit of $4 million and $272 million, respectively, to reflect the effect of the Tax Reform enacted on December 22, 2017.
Temporary differences between the financial reporting carrying amounts and the tax bases of assets and liabilities give rise to deferred taxes.  Total deferred tax assets and deferred tax liabilities as of December 31, 2019 and 2018 were as follows (in millions):
 
2019
 
2018
Deferred Tax Assets:
 

 
 

Net operating losses:
 

 
 

Federal
$
22

 
$
29

State
92

 
74

Goodwill and intangible assets
10

 
13

Accruals
39

 
6

Other
28

 
41

 
191

 
163

Valuation allowance for deferred tax assets
(65
)
 
(66
)
Total deferred tax assets
$
126

 
$
97

 
 
 
 
Deferred Tax Liabilities:
 

 
 

Goodwill and intangible assets
$
(415
)
 
$
(427
)
Property & equipment, net
(90
)
 
(80
)
Other
(28
)
 
(3
)
Total deferred tax liabilities
(533
)
 
(510
)
Net deferred tax liabilities
$
(407
)
 
$
(413
)

At December 31, 2019, the Company had approximately $106 million and $1.9 billion of gross federal and state net operating losses, respectively. Those losses will expire during various years from 2020 to 2039, and some of them are subject to annual limitations under the Internal Revenue Code Section 382 and similar state provisions.  As discussed in Income Taxes under Note 1. Nature of Operations and Summary of Significant Accounting Policies, we establish valuation allowances in accordance with the guidance related to accounting for income taxes.  As of December 31, 2019, a valuation allowance has been provided for deferred tax assets related to a substantial portion of our available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary book/tax basis differences, alternative tax strategies and projected future taxable income. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that they will be realized in the future.  During the year ended December 31, 2019, we decreased our valuation allowance by $1 million to $65 million. The decrease in valuation allowance was primarily due to the change in the realizability of certain state deferred tax assets as a result of a business combination in 2019. During the year ended December 31, 2018, we increased our valuation allowance by $3 million to $66 million. The increase in valuation allowance was primarily due to uncertainty in the realizability of a state deferred tax asset generated by a subsidiary in 2018.
 
The following table summarizes the activity related to our accrued unrecognized tax benefits (in millions):
 
2019
 
2018
 
2017
Balance at January 1,
$
7

 
$
7

 
$
5

Additions related to prior year tax positions
4

 
—

 
2

Additions related to current year tax positions
—

 
2

 
1

Reductions related to prior year tax positions
—

 
(1
)
 
—

Reductions related to settlements with taxing authorities
—

 
—

 
(1
)
Reductions related to expiration of the applicable statute of limitations
—

 
(1
)
 
—

Balance at December 31,
$
11

 
$
7

 
$
7


We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions.  Our 2013 through 2015 federal tax returns are currently under audit, and several of our subsidiaries are currently under state examinations for various years. Our 2015 and subsequent federal and/or state tax returns remain subject to examination by various tax authorities.  We do not anticipate the resolution of these matters will result in a material change to our consolidated financial statements.  In addition, we believe it is reasonably possible that our liability for unrecognized tax benefits related to continuing operations could be reduced by up to $4 million, in the next twelve months, as a result of expected statute of limitations expirations, the application of limits under available state administrative practice exceptions, and the resolution of examination issues and settlements with federal and certain state tax authorities.