Income Taxes

12 Months Ended

Dec. 31, 2013

Entity Information [Line Items]

Income Taxes

Income Taxes

Our income before income taxes is solely from domestic operations. The (benefit from) provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2013			2012		2011
Current:
Federal	$	26,056		$	21	$	543
State	5,636			1,571		652
Foreign	—			633		—
Total current	$	31,692		$	2,225	$	1,195
Deferred:
Federal	$	(124,201	)	$	33,865	$	(25,907	)
State	(32,911		)	4,373		8,667
Total deferred	(157,112		)	38,238		(17,240		)
Total current and deferred	$	(125,420	)	$	40,463	$	(16,045	)

The following table reconciles the amount that would be calculated by applying the 35% federal statutory rate to income before income taxes to the actual (benefit from) provision for income taxes (in thousands):

	Year Ended December 31,
	2013			2012			2011
Provision assuming federal statutory rate	$	10,913		$	7,871		$	11,780
State taxes, net of federal tax benefit	3,863			5,723			1,790
State tax law/rate changes, net of federal tax benefit	—			1,883			5,703
Change in valuation allowance	(18,157		)	(4,622		)	(36,541		)
Share compensation	(53		)	(17		)	601
Reserve for tax contingencies	124			633			—
Impact of JV Sale Transaction	—			28,435			—
Impact of the Merger	(124,306		)	—			—
Non-deductible acquisition and Merger related transaction costs	1,645			—			—
Other	551			557			622
	$	(125,420	)	$	40,463		$	(16,045	)
Effective income tax rate on continuing operations	(402.2		)%	179.9		%	(47.7		)%

During the year ended December 31, 2013, we recognized a $124.3 million tax benefit as a result of the Merger as well as an $18.2 million tax benefit as a result of the reversal of state valuation allowances. These valuation allowances were reversed after evaluating our ability to recover certain net operating loss carryforwards due to the change in tax structure as a result of the Merger, as we concluded the Company will more likely than not be able to realize these deferred tax assets.

The impact of the JV Sale Transaction is a result of entering into and consummating the transactions contemplated by the JV Transaction Agreement on February 12, 2013, as described further in Note 1—"Basis of Presentation and Summary of Significant Accounting Policies" and in Note 13—"Commitments and Contingencies." The JV Sale Transaction resulted in the recognition of $27.5 million and $0.9 million of incremental short-term deferred federal and state tax liabilities, respectively, in excess of those which were previously established. The financial impact of the JV Sale Transaction and corresponding tax expense of $28.4 million are reflected in our consolidated financial statements for the year ended December 31, 2012. During the first quarter of 2013, approximately $162.8 million of short term deferred liabilities were reclassified to income taxes payable upon the consummation of the JV Sale Transaction. As a result of the close of the Merger on July 30, 2013, $131.5 million of this tax liability was extinguished, resulting in a remaining tax liability of approximately $31.3 million associated with the JV Sale Transaction. We made state and federal tax payments to settle this tax liability during the fourth quarter of 2013.

The 2011 state tax law/rate change, net of federal tax benefit, of $5.7 million is primarily a result of state tax legislation enacted in Michigan in May 2011, which repealed the Michigan business tax ("MBT"), and implemented a corporate income tax instead, effective January 2012. As a result of the elimination of the MBT, certain future tax deductions that were available to be utilized beginning in 2015, and had been recognized as deferred tax assets in our financial statements, will not be deductible. Therefore, during the year ended December 31, 2011, we recognized incremental deferred income tax expense of $5.1 million, net of federal benefit, for the reversal of these previously established deferred tax assets. In addition, the 2012 state tax law/rate change, net of federal tax benefit, of $1.9 million is a result of a change in the effective tax rate used to value our deferred tax assets/liabilities.

The components of the net deferred tax liability are as follows (in thousands):

	December 31,
	2013			2012
Deferred tax liabilities:
Deferred gain related to equity investment in NBC joint venture	$	—		$	259,049
Property and equipment	11,816			12,822
Intangible assets	54,859			36,761
Deferred gain on debt repurchase	18,140			18,309
Noncontrolling interest	849			549
Other	7,629			7,476
Total	$	93,293		$	334,966
Deferred tax assets:
Net operating loss carryforwards	$	(17,707	)	$	(110,169	)
Equity investments	(2,372		)	(1,554		)
Other	(15,426		)	(32,625		)
Valuation allowance	—			18,157
Total	(35,505		)	(126,191		)
Net deferred tax liabilities	$	57,788		$	208,775

We maintain a valuation allowance related to our deferred tax asset position when management believes it is more likely than not that the deferred tax assets will not be realized in the future. As of December 31, 2012, we had a valuation allowance of $18.2 million offsetting certain state net operating loss carryforwards and other state deferred tax assets. During the third quarter of 2013, after evaluating our ability to recover certain net operating loss carryforwards due to the change in tax structure as a result of the Merger, we determined that we will more likely than not be able to realize these deferred tax assets. As a result, we reversed the valuation allowance and recognized a corresponding tax benefit of $18.2 million.

As of December 31, 2013, we had federal net operating loss carryforwards (tax effected) of approximately $4.6 million that begin to expire in 2034. Additionally, we had state net operating loss carryforwards that vary by jurisdiction (tax effected, net of federal benefit) of $13.1 million, expiring through 2033. Included in the total federal and state net operating loss carryforwards (tax effected) is $4.9 million that would be recorded in equity when realized.

Unrecognized Tax Benefits.

The Company's uncertain tax positions for the years ended December 31, 2013, 2012, and 2011 are limited to certain unrecognized state and foreign benefits totaling $24.5 million, $26.6 million and $26.4 million, respectively. As of December 31, 2013, 2012 and 2011, there are $0.9 million, $0.8 million and $0 million of unrecognized tax benefits, respectively, that if recognized would reduce the effective tax rate from continuing operations.

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. During the years ended December 31, 2013, 2012 and 2011, we did not recognize or accrue any amounts related to interest and penalties.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

	Year Ended December 31,
	2013			2012			2011
Balance at beginning of year	$	26,559		$	26,381		$	26,610
Additions for tax positions of current year	733			1,798			2,386
Additions for tax positions of prior years	—			—			—
Reductions for tax positions of prior years	(2,084		)	(1,133		)	(2,128		)
Reductions related to settlements with taxing authorities	—			—			—
Reductions related to expiration of the statute of limitations	(730		)	(487		)	(487		)
Balance at end of year	$	24,478		$	26,559		$	26,381

We file a consolidated federal income tax return and we file numerous other consolidated and separate income tax returns in U.S. state jurisdictions. Tax years 2009-2012 remain open to examination by major taxing jurisdictions.

LIN Television

Entity Information [Line Items]

Income Taxes

Income Taxes

Our income before income taxes is solely from domestic operations. The (benefit from) provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2013			2012		2011
Current:
Federal	$	26,056		$	21	$	543
State	5,636			1,571		652
Foreign	—			633		—
Total current	$	31,692		$	2,225	$	1,195
Deferred:
Federal	$	(124,201	)	$	33,865	$	(25,907	)
State	(32,911		)	4,373		8,667
Total deferred	(157,112		)	38,238		(17,240		)
Total current and deferred	$	(125,420	)	$	40,463	$	(16,045	)

The following table reconciles the amount that would be calculated by applying the 35% federal statutory rate to income before income taxes to the actual (benefit from) provision for income taxes (in thousands):

	Year Ended December 31,
	2013			2012			2011
Provision assuming federal statutory rate	$	10,913		$	7,871		$	11,780
State taxes, net of federal tax benefit	3,863			5,723			1,790
State tax law/rate changes, net of federal tax benefit	—			1,883			5,703
Change in valuation allowance	(18,157		)	(4,622		)	(36,541		)
Share compensation	(53		)	(17		)	601
Reserve for tax contingencies	124			633			—
Impact of JV Sale Transaction	—			28,435			—
Impact of the Merger	(124,306		)	—			—
Non-deductible acquisition and Merger related transaction costs	1,645			—			—
Other	551			557			622
	$	(125,420	)	$	40,463		$	(16,045	)
Effective income tax rate on continuing operations	(402.2		)%	179.9		%	(47.7		)%

During the year ended December 31, 2013, we recognized a $124.3 million tax benefit as a result of the Merger as well as an $18.2 million tax benefit as a result of the reversal of state valuation allowances. These valuation allowances were reversed after evaluating our ability to recover certain net operating loss carryforwards due to the change in tax structure as a result of the Merger, as we concluded the Company will more likely than not be able to realize these deferred tax assets.

The impact of the JV Sale Transaction is a result of entering into and consummating the transactions contemplated by the JV Transaction Agreement on February 12, 2013, as described further in Note 1—"Basis of Presentation and Summary of Significant Accounting Policies" and in Note 13—"Commitments and Contingencies." The JV Sale Transaction resulted in the recognition of $27.5 million and $0.9 million of incremental short-term deferred federal and state tax liabilities, respectively, in excess of those which were previously established. The financial impact of the JV Sale Transaction and corresponding tax expense of $28.4 million are reflected in our consolidated financial statements for the year ended December 31, 2012. During the first quarter of 2013, approximately $162.8 million of short term deferred liabilities were reclassified to income taxes payable upon the consummation of the JV Sale Transaction. As a result of the close of the Merger on July 30, 2013, $131.5 million of this tax liability was extinguished, resulting in a remaining tax liability of approximately $31.3 million associated with the JV Sale Transaction. We made state and federal tax payments to settle this tax liability during the fourth quarter of 2013.

The 2011 state tax law/rate change, net of federal tax benefit, of $5.7 million is primarily a result of state tax legislation enacted in Michigan in May 2011, which repealed the Michigan business tax ("MBT"), and implemented a corporate income tax instead, effective January 2012. As a result of the elimination of the MBT, certain future tax deductions that were available to be utilized beginning in 2015, and had been recognized as deferred tax assets in our financial statements, will not be deductible. Therefore, during the year ended December 31, 2011, we recognized incremental deferred income tax expense of $5.1 million, net of federal benefit, for the reversal of these previously established deferred tax assets. In addition, the 2012 state tax law/rate change, net of federal tax benefit, of $1.9 million is a result of a change in the effective tax rate used to value our deferred tax assets/liabilities.

The components of the net deferred tax liability are as follows (in thousands):

	December 31,
	2013			2012
Deferred tax liabilities:
Deferred gain related to equity investment in NBC joint venture	$	—		$	259,049
Property and equipment	11,816			12,822
Intangible assets	54,859			36,761
Deferred gain on debt repurchase	18,140			18,309
Noncontrolling interest	849			549
Other	7,629			7,476
Total	$	93,293		$	334,966
Deferred tax assets:
Net operating loss carryforwards	$	(17,707	)	$	(110,169	)
Equity investments	(2,372		)	(1,554		)
Other	(15,426		)	(32,625		)
Valuation allowance	—			18,157
Total	(35,505		)	(126,191		)
Net deferred tax liabilities	$	57,788		$	208,775

We maintain a valuation allowance related to our deferred tax asset position when management believes it is more likely than not that the deferred tax assets will not be realized in the future. As of December 31, 2012, we had a valuation allowance of $18.2 million offsetting certain state net operating loss carryforwards and other state deferred tax assets. During the third quarter of 2013, after evaluating our ability to recover certain net operating loss carryforwards due to the change in tax structure as a result of the Merger, we determined that we will more likely than not be able to realize these deferred tax assets. As a result, we reversed the valuation allowance and recognized a corresponding tax benefit of $18.2 million.

As of December 31, 2013, we had federal net operating loss carryforwards (tax effected) of approximately $4.6 million that begin to expire in 2034. Additionally, we had state net operating loss carryforwards that vary by jurisdiction (tax effected, net of federal benefit) of $13.1 million, expiring through 2033. Included in the total federal and state net operating loss carryforwards (tax effected) is $4.9 million that would be recorded in additional paid-in capital when realized.

Unrecognized Tax Benefits.

The Company's uncertain tax positions for the years ended December 31, 2013, 2012, and 2011 are limited to certain unrecognized state and foreign benefits totaling $24.5 million, $26.6 million and $26.4 million, respectively. As of December 31, 2013, 2012 and 2011, there are $0.9 million, $0.8 million and $0 million of unrecognized tax benefits, respectively, that if recognized would reduce the effective tax rate from continuing operations.

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. During the years ended December 31, 2013, 2012 and 2011, we did not recognize or accrue any amounts related to interest and penalties.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

	Year Ended December 31,
	2013			2012			2011
Balance at beginning of year	$	26,559		$	26,381		$	26,610
Additions for tax positions of current year	733			1,798			2,386
Additions for tax positions of prior years	—			—			—
Reductions for tax positions of prior years	(2,084		)	(1,133		)	(2,128		)
Reductions related to settlements with taxing authorities	—			—			—
Reductions related to expiration of the statute of limitations	(730		)	(487		)	(487		)
Balance at end of year	$	24,478		$	26,559		$	26,381

We file a consolidated federal income tax return and we file numerous other consolidated and separate income tax returns in U.S. state jurisdictions. Tax years 2009-2012 remain open to examination by major taxing jurisdictions.