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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Disclosure Text Block |
Income Taxes | NOTE 4 INCOME TAXES TDS' current i ncome taxes balances at December 31, 2014 and 2013 were as follows:
December 31, | 2014 |  | 2013 |
(Dollars in thousands) |  |  |  |  |  |
Federal income taxes receivable (payable) | $ | 108,820 |  | $ | (20,288) |
Net state income taxes receivable (payable) |  | 4,391 |  |  | 2,397 |
Income tax expense (benefit) is summarized as follows:
Year Ended December 31, | 2014 |  | 2013 |  | 2012
(Dollars in thousands) |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
| Federal | $ | (87,736) |  | $ | 181,579 |  | $ | 9,705
| State |  | 11,091 |  |  | 11,614 |  |  | 5,092
Deferred |  |  |  |  |  |  |  |
| Federal |  | 41,851 |  |  | (65,970) |  |  | 61,113
| Federal - valuation allowance adjustment |  | (10,816) |  |  | - |  |  | -
| State |  | 2,208 |  |  | (1,180) |  |  | (2,328)
| State - valuation allowance adjustment |  | 38,470 |  |  | - |  |  | -
|  |  | $ | (4,932) |  | $ | 126,043 |  | $ | 73,582
A reconciliation of TDS' income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to TDS' effective income tax expense rate is as follows:
Year Ended December 31, | 2014 |  | 2013 |  | 2012
|  | Amount |  | Rate |  | Amount |  | Rate |  | Amount |  | Rate
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Statutory federal income tax expense and rate | $ | (53.3) |  | 35.0 | % |  | $ | 102.5 |  | 35.0 | % |  | $ | 68.7 |  | 35.0 | %
State income taxes, net of federal benefit (1) |  | 42.8 |  | (28.1) |  |  |  | 10.5 |  | 3.6 |  |  |  | 8.4 |  | 4.2 |
Effect of noncontrolling interests |  | (5.8) |  | 3.8 |  |  |  | (1.0) |  | (0.4) |  |  |  | - |  | - |
Gains (losses) on investments and sale of assets (2) |  | - |  | - |  |  |  | 14.9 |  | 5.1 |  |  |  | - |  | - |
Correction of deferred taxes (3) |  | - |  | - |  |  |  | - |  | - |  |  |  | (6.1) |  | (3.1) |
Change in federal valuation allowance (4) |  | (8.7) |  | 5.7 |  |  |  | - |  | - |  |  |  | - |  | - |
Goodwill impairment (5) |  | 18.3 |  | (12.0) |  |  |  | - |  | - |  |  |  | - |  | - |
Other differences, net |  | 1.8 |  | (1.2) |  |  |  | (0.9) |  | (0.3) |  |  |  | 2.6 |  | 1.4 |
Total income tax expense and rate | $ | (4.9) |  | 3.2 | % |  | $ | 126.0 |  | 43.0 | % |  | $ | 73.6 |  | 37.5 | %
(1) | State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance. During the third quarter of 2014 TDS recorded a $38.5 million increase to income tax expense related to a valuation allowance recorded against certain state deferred tax assets. In each interim period, TDS evaluates the available positive and negative evidence to assess whether deferred tax assets are realizable, on a more likely than not basis. During the year ended December 31, 2014, based on revised forecasts of future state income, TDS concluded that the negative evidence related to the realization of certain state deferred tax assets outweighed the positive evidence. Accordingly, TDS determined that such deferred tax assets related to certain states were not realizable, on a more likely than not basis.
(2) | Gains (losses) on investments and sale of assets represents 2013 tax expense related to the NY1 & NY2 Deconsolidation and the Divestiture Transaction.
(3) | Correction of deferred taxes reflects immaterial adjustments to correct deferred tax balances in 2012 related to tax basis and law changes that related to periods prior to 2012.
(4) | Change in federal valuation allowance relates primarily to a decrease to income tax expense in the third quarter of 2014 due to a valuation allowance reduction for federal net operating losses previously limited under loss utilization rules. Due to the shutdown of Airadigm’s consumer wireless business and resulting intercompany sale of certain assets by Airadigm to U.S. Cellular during the year (as described in Note 6 — Acquisitions, Divestitures and Exchanges), Airadigm is expected to recognize sufficient taxable income for TDS to utilize the previously limited net operating losses.
(5) | Goodwill impairment reflects an adjustment to increase income tax expense by $18.3 million related to a portion of the goodwill impairment of Suttle-Straus and the HMS reporting unit recorded in 2014 which is nondeductible for income tax purposes. See Note 7 — Intangible Assets for additional information related to the goodwill impairment.
Significant components of TDS' deferred income tax assets and liabilities at December 31, 2014 and 2013 w ere as follows:
December 31, | 2014 |  | 2013 |
(Dollars in thousands) |  |  |  |  |  |
Deferred tax assets |  |  |  |  |  |
| Current deferred tax assets | $ | 113,402 |  | $ | 114,532 |
| Net operating loss (“NOL”) carryforwards |  | 135,676 |  |  | 121,651 |
| Stock-based compensation |  | 54,789 |  |  | 50,563 |
| Compensation and benefits - other |  | 11,014 |  |  | 12,681 |
| Deferred rent |  | 19,604 |  |  | 20,500 |
| Other |  | 35,523 |  |  | 32,444 |
Total deferred tax assets |  | 370,008 |  |  | 352,371 |
| Less valuation allowance |  | (113,553) |  |  | (79,064) |
Net deferred tax assets |  | 256,455 |  |  | 273,307 |
Deferred tax liabilities |  |  |  |  |  |
| Property, plant and equipment |  | 667,540 |  |  | 637,090 |
| Licenses/intangibles |  | 259,865 |  |  | 251,578 |
| Partnership investments |  | 151,123 |  |  | 136,581 |
| Other |  | 9,724 |  |  | 4,956 |
| Total deferred tax liabilities |  | 1,088,252 |  |  | 1,030,205 |
Net deferred income tax liability | $ | 831,797 |  | $ | 756,898 |
At December 31, 2014, TDS and certain subsidiaries had $2,315.3 mill ion of state NOL carryforwards (generating a $111.3 million deferred tax asset) available to offset future taxable income. The state NOL carryforwards expire between 2015 and 2034. Certain subsidiaries had federal NOL carryforwards (generating a $24.3 million deferred tax asset) available to offset their future taxable income. The federal NOL carryforwards expire between 2018 and 2034. A valuation allowance was established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilize d.
A summary of TDS' deferred tax asset valuation allowance is as follows:
|  |  | 2014 |  | 2013 |  | 2012
(Dollars in thousands) |  |  |  |  |  |  |  |
Balance at January 1, | $ | 79,064 |  | $ | 70,502 |  | $ | 49,686
| Charged to income tax expense |  | 34,489 |  |  | 1,954 |  |  | 5,268
| Charged to other accounts |  | - |  |  | 6,608 |  |  | 15,548
Balance at December 31, | $ | 113,553 |  | $ | 79,064 |  | $ | 70,502
As of December 31, 2014, the valuation allowance reduced current deferred tax assets by $5.7 million and noncurrent deferred tax assets by $107.8 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  |  | 2014 |  | 2013 |  | 2012
(Dollars in thousands) |  |  |  |  |  |  |  |
Unrecognized tax benefits balance at January 1, | $ | 30,390 |  | $ | 28,420 |  | $ | 28,841
| Additions for tax positions of current year |  | 7,610 |  |  | 6,388 |  |  | 7,027
| Additions for tax positions of prior years |  | 883 |  |  | 1,858 |  |  | 1,673
| Reductions for tax positions of prior years |  | (399) |  |  | (467) |  |  | (7)
| Reductions for settlements of tax positions |  | (312) |  |  | (1,337) |  |  | (21)
| Reductions for lapses in statutes of limitations |  | (356) |  |  | (4,472) |  |  | (9,093)
Unrecognized tax benefits balance at December 31, | $ | 37,816 |  | $ | 30,390 |  | $ | 28,420
Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits were recognized, they would have re duced income tax expense in 2014, 2013 and 2012 by $24.6 million, $19.8 million and $18.6 million, respectively, net of the federal benefit from state income taxes. As of December 31, 2014, it is reasonably possible that unrecognized tax benefits could decrease by approximately $10 million in the next twelve months. The nature of the uncertainty relates primarily to state income tax positions and their resolution or the expiration of statutes of limitation. TDS recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax ex pense. The amounts charged to i ncome tax expense related to interest and penalties resulted in an expense of $3.4 million and $0.7 million in 2014 and 2013, respectively, and a benefit of $1.5 million in 2012. Net accrued interest and penalties were $16.2 million and $12.4 million at December 31, 2014 and 2013, respectively. TDS and its subsidiaries file federal and state income tax returns. TDS remains subject to federal income tax audits for the tax years after 2011. With only a few exceptions, TDS is no longer subject to state income tax audits for years prior to 2010.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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