INCOME TAXES	3 Months Ended
Mar. 31, 2016
INCOME TAXES
INCOME TAXES	NOTE 10INCOME TAXES As a result of the debt exchange in December 2015, we generated cancellation of debt income of $1.39 billion for tax purposes, which represented the excess of the face value of the surrendered notes over the fair value of the newly issued notes at the time of the exchange. The tax gain exceeded our operating loss for the year. We reported the related $336 million of federal and state taxes in current and other long-term liabilities in the accompanying balance sheet at December 31, 2015. During the first quarter of 2016, we reclassified this amount to deferred taxes to reflect the reduction in the tax basis of our assets resulting from the exclusion of the $1.39 billion in cancellation of debt income from our 2015 taxable income. We also recorded a deferred income tax benefit of approximately $78 million to reflect a change in the valuation allowance on our deferred tax assets. Our effective tax rate was 61% and 41% for the three months ended March 31, 2016 and March 31, 2015, respectively. The higher rate for the first quarter of 2016 reflects the deferred tax benefit for the change in the valuation allowance.

INCOME TAXES

3 Months Ended

Mar. 31, 2016

NOTE 10INCOME TAXES

As a result of the debt exchange in December 2015, we generated cancellation of debt income of $1.39 billion for tax purposes, which represented the excess of the face value of the surrendered notes over the fair value of the newly issued notes at the time of the exchange. The tax gain exceeded our operating loss for the year. We reported the related $336 million of federal and state taxes in current and other long-term liabilities in the accompanying balance sheet at December 31, 2015. During the first quarter of 2016, we reclassified this amount to deferred taxes to reflect the reduction in the tax basis of our assets resulting from the exclusion of the $1.39 billion in cancellation of debt income from our 2015 taxable income. We also recorded a deferred income tax benefit of approximately $78 million to reflect a change in the valuation allowance on our deferred tax assets.

Our effective tax rate was 61% and 41% for the three months ended March 31, 2016 and March 31, 2015, respectively. The higher rate for the first quarter of 2016 reflects the deferred tax benefit for the change in the valuation allowance.