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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

December 31,	2012		2011
(Dollars in thousands)
Federal income taxes receivable (payable)	$	(1,614)	$	73,525
State income taxes receivable		1,612		1,266

Income tax expense

Income tax expense (benefit) is summarized as follows:

Year Ended December 31,		2012		2011		2010
(Dollars in thousands)
Current
	Federal	$	10,547	$	(90,235)	$	19,290
	State		4,186		1,049		(11,059)
Deferred
	Federal		54,490		187,581		57,759
	State		(5,246)		15,683		15,968
		$	63,977	$	114,078	$	81,958

Income tax reconciliation

Year Ended December 31,		2012				2011				2010
		Amount		Rate		Amount		Rate		Amount		Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	71.8	35.0	%	$	109.5	35.0	%	$	84.4	35.0	%
State income taxes, net of federal benefit (1)			3.7	1.8			4.5	1.4			5.0	2.1
Effect of noncontrolling interests			(6.3)	(3.1)			(4.9)	(1.6)			(4.6)	(1.9)
Correction of deferred taxes (2)			(5.3)	(2.6)			6.1	2.0			-	-
Other differences, net			0.1	0.1			(1.1)	(0.3)			(2.8)	(1.2)
Total income tax expense and rate		$	64.0	31.2	%	$	114.1	36.5	%	$	82.0	34.0	%

(1)	Net state income taxes include changes in the valuation allowance. The 2011 benefit primarily relates to the ability to utilize net operating losses as a result of state income tax law changes. In addition, state tax benefits related to the settlement of state tax audits and the expiration of statutes of limitations are included in 2012, 2011 and 2010.

(2)	U.S. Cellular recorded immaterial adjustments to correct deferred tax balances in 2012 and 2011 related to tax basis adjustments and law changes that related to periods prior to 2012 and 2011, respectively.

Temporary income tax differences

U.S. Cellular’s noncurrent deferred income tax assets and liabilities at December 31, 2012 and 2011 and the temporary differences that gave rise to them were as follows:

December 31,		2012		2011
(Dollars in thousands)
Noncurrent deferred tax assets
	Net operating loss (“NOL”) carryforwards	$	63,240	$	48,565
	Stock-based compensation		22,411		19,079
	Compensation and benefits - other		13,673		2,985
	Deferred rent		15,822		12,656
	Other		25,432		20,554
			140,578		103,839
	Less valuation allowance		(40,208)		(29,262)
	Total noncurrent deferred tax assets		100,370		74,577
Noncurrent deferred tax liabilities
	Property, plant and equipment		527,547		482,433
	Licenses/intangibles		294,738		267,344
	Partnership investments		124,221		120,941
	Other		3,682		3,049
	Total noncurrent deferred tax liabilities		950,188		873,767
Net noncurrent deferred income tax liability		$	849,818	$	799,190

Deferred tax valuation allowance

A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:

		2012		2011		2010
(Dollars in thousands)
Balance at January 1,		$	30,261	$	29,891	$	19,234
	Charged to income tax expense		3,033		(1,450)		(832)
	Charged to other accounts		8,001		1,820		11,489
Balance at December 31,		$	41,295	$	30,261	$	29,891

As of December 31, 2012, the valuation allowance reduced current deferred tax assets by $1.1 million and noncurrent deferred tax assets by $40.2 million.

Income tax unrecognized benefits summary

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

		2012		2011		2010
(Dollars in thousands)
Unrecognized tax benefits balance at January 1,		$	28,745	$	32,547	$	34,442
	Additions for tax positions of current year		6,656		4,487		5,119
	Additions for tax positions of prior years		854		332		550
	Reductions for tax positions of prior years		(115)		(1,104)		(1,560)
	Reductions for settlements of tax positions		-		(244)		(5,938)
	Reductions for lapses in statutes of limitations		(9,680)		(7,273)		(66)
Unrecognized tax benefits balance at December 31,		$	26,460	$	28,745	$	32,547

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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- Definition

Tabular disclosure of valuation allowances to reduce deferred tax assets to net realizable value, including identification of the deferred tax asset more likely than not will not be fully realized and the corresponding amount of the valuation allowance.

+ References+ Details