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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Note 5 Income Taxes TDS’ current income taxes balances at December 31, 2023 and 2022, were as follows:
December 31, | 2023 |  | 2022
(Dollars in millions) |  |  |
Federal income taxes receivable | $ | 1 |  |  | $ | 56 |
Net state income taxes receivable | 3 |  |  | 3 |
Income tax expense (benefit) is summarized as follows:
Year Ended December 31, | 2023 |  | 2022 |  | 2021
(Dollars in millions) |  |  |  |  |
Current |  |  |  |  |
Federal | $ | (1) |  |  | $ | 1 |  |  | $ | 2 |
State | 3 |  |  | 5 |  |  | (21) |
Deferred |  |  |  |  |
Federal | (10) |  |  | 32 |  |  | 59 |
State | 18 |  |  | 15 |  |  | (7) |
Total income tax expense (benefit) | $ | 10 |  |  | $ | 53 |  |  | $ | 33 |
A reconciliation of TDS’ income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax rate to TDS’ effective income tax rate is as follows:
Year Ended December 31, | 2023 |  | 2022 |  | 2021
| Amount |  | Rate |  | Amount |  | Rate |  | Amount |  | Rate
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |
Statutory federal income tax expense and rate | $ | (100) |  |  | 21.0 | % |  | $ | 26 |  |  | 21.0 | % |  | $ | 47 |  |  | 21.0 | %
State income taxes, net of federal benefit 1 | 16 |  |  | (3.4) |  |  | 16 |  |  | 12.8 |  |  | (23) |  |  | (10.3) |
Change in federal valuation allowance 2 | 8 |  |  | (1.7) |  |  | 7 |  |  | 5.7 |  |  | 7 |  |  | 3.1 |
Goodwill impairment 3 | 83 |  |  | (17.4) |  |  | — |  |  | — |  |  | — |  |  | — |
Nondeductible compensation | 7 |  |  | (1.4) |  |  | 7 |  |  | 5.6 |  |  | 6 |  |  | 2.9 |
Tax credits | (3) |  |  | 0.6 |  |  | (2) |  |  | (1.9) |  |  | (2) |  |  | (0.8) |
Other differences, net | (1) |  |  | 0.2 |  |  | (1) |  |  | (0.6) |  |  | (2) |  |  | (0.8) |
Total income tax expense (benefit) and rate | $ | 10 |  |  | (2.1) | % |  | $ | 53 |  |  | 42.6 | % |  | $ | 33 |  |  | 15.1 | %
1 State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to state valuation allowances. State taxes in 2021 are a net benefit due primarily to the reduction of tax accruals resulting from expirations of state statute of limitations for prior tax years. 2 Change in federal valuation allowance is due primarily to annual interest expense from partnership investments that carryforward but may not be realized. 3 Goodwill impairment reflects the federal tax effect of the portion of the impaired goodwill that is not amortizable 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, 2023 and 2022, were as follows:
December 31, | 2023 |  | 2022
(Dollars in millions) |  |  |
Deferred tax assets |  |  |
Net operating loss (NOL) carryforwards | $ | 284 |  |  | $ | 250 |
Lease liabilities | 260 |  |  | 265 |
Contract liabilities | 61 |  |  | 63 |
Interest expense carryforwards | 133 |  |  | 74 |
Asset retirement obligation | 123 |  |  | 116 |
Other | 98 |  |  | 129 |
Total deferred tax assets | 959 |  |  | 897 |
Less valuation allowance | (216) |  |  | (177) |
Net deferred tax assets | 743 |  |  | 720 |
Deferred tax liabilities |  |  |
Property, plant and equipment | 841 |  |  | 805 |
Licenses/intangibles | 410 |  |  | 419 |
Partnership investments | 181 |  |  | 173 |
Lease assets | 242 |  |  | 245 |
Other | 44 |  |  | 43 |
Total deferred tax liabilities | 1,718 |  |  | 1,685 |
Net deferred income tax liability | $ | 975 |  |  | $ | 965 |
Presented in the Consolidated Balance Sheet as: |  |  |
Deferred income tax liability, net | $ | 975 |  |  | $ | 969 |
Other assets and deferred charges | — |  |  | (4) |
Net deferred income tax liability | $ | 975 |  |  | $ | 965 |
At December 31, 2023, TDS and certain subsidiaries had $420 million of federal NOL carryforwards (generating a $88 million deferred tax asset) available to offset future taxable income. The federal NOL carryforwards generally expire between 2024 and 2037, with the exception of federal NOLs generated after 2017, which do not expire. TDS and certain subsidiaries had $4,050 million of state NOL carryforwards (generating a $195 million deferred tax asset) available to offset future taxable income. The state NOL carryforwards expire between 2024 and 2043. A valuation allowance was established for certain federal and state NOL carryforwards since it is more likely than not that a portion of such carryforwards will expire before they can be utilized. At December 31, 2023, TDS and certain subsidiaries had $523 million of federal interest expense carryforwards (generating a $110 million deferred tax asset) available to offset future taxable income. The federal interest expense carryforwards do not expire. TDS and certain subsidiaries had $556 million of state interest expense carryforwards (generating a $23 million deferred tax asset) available to offset future taxable income. The state interest expense carryforwards generally do not expire. A valuation allowance was established for certain federal and state interest expense carryforwards since it is more likely than not that a portion of such carryforwards will not be utilized. A summary of TDS' deferred tax asset valuation allowance is as follows:
| 2023 |  | 2022 |  | 2021
(Dollars in millions) |  |  |  |  |
Balance at beginning of year | $ | 177 |  |  | $ | 149 |  |  | $ | 158 |
Charged to Income tax expense | 39 |  |  | 28 |  |  | (9) |
Balance at end of year | $ | 216 |  |  | $ | 177 |  |  | $ | 149 |
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2023 |  | 2022 |  | 2021
(Dollars in millions) |  |  |  |  |
Unrecognized tax benefits balance at beginning of year | $ | 38 |  |  | $ | 37 |  |  | $ | 54 |
Additions for tax positions of current year | 10 |  |  | 6 |  |  | 8 |
Additions for tax positions of prior years | — |  |  | 1 |  |  | — |
Reductions for tax positions of prior years | (2) |  |  | — |  |  | (3) |
Reductions for settlements of tax positions | — |  |  | — |  |  | (2) |
Reductions for lapses in statutes of limitations | (6) |  |  | (6) |  |  | (20) |
Unrecognized tax benefits balance at end of year | $ | 40 |  |  | $ | 38 |  |  | $ | 37 |
Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the Consolidated Balance Sheet. If these benefits were recognized at each respective year end period, they would have reduced income tax expense in 2023, 2022 and 2021 by $31 million, $30 million and $30 million, respectively, net of the federal benefit from state income taxes. TDS recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax expense (benefit). The amounts charged to income tax expense related to interest and penalties resulted in nominal expense in 2023 and 2022, and a benefit of $10 million in 2021. Net accrued liabilities for interest and penalties were $13 million at both December 31, 2023 and 2022, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet. TDS and its subsidiaries file federal and state income tax returns. With limited exceptions, TDS is no longer subject to federal and state income tax audits for the years prior to 2020.

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