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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure |
Income taxes receivable (payable) |
December 31, | 2014 |  | 2013 |
(Dollars in thousands) |  |  |  |  |  |
Federal income taxes receivable (payable) | $ | 73,510 |  | $ | (32,351) |
Net state income taxes receivable (payable) |  | 1,199 |  |  | (1,545) |
Income tax expense (benefit) |
Income tax expense (benefit) is summarized as follows:
Year Ended December 31, | 2014 |  | 2013 |  | 2012
(Dollars in thousands) |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
| Federal | $ | (77,931) |  | $ | 180,056 |  | $ | 10,547
| State |  | 8,545 |  |  | 8,426 |  |  | 4,186
Deferred |  |  |  |  |  |  |  |
| Federal |  | 44,881 |  |  | (69,917) |  |  | 54,490
| State |  | 6,276 |  |  | (5,431) |  |  | (5,246)
| State - valuation allowance adjustment |  | 6,447 |  |  | - |  |  | -
|  |  | $ | (11,782) |  | $ | 113,134 |  | $ | 63,977
Income tax reconciliation |
Year Ended December 31, | 2014 |  | 2013 |  | 2012
|  | Amount |  | Rate |  | Amount |  | Rate |  | Amount |  | Rate
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Statutory federal income tax expense and rate | $ | (20.5) |  | 35.0 | % |  | $ | 90.2 |  | 35.0 | % |  | $ | 71.8 |  | 35.0 | %
State income taxes, net of federal benefit (1) |  | 12.2 |  | (20.8) |  |  |  | 5.2 |  | 2.0 |  |  |  | 3.7 |  | 1.8 |
Effect of noncontrolling interests |  | (5.8) |  | 9.8 |  |  |  | (2.2) |  | (0.9) |  |  |  | (6.3) |  | (3.1) |
Gains (losses) on investments and sale of assets (2) |  | - |  | - |  |  |  | 20.5 |  | 8.0 |  |  |  | - |  | - |
Correction of deferred taxes (3) |  | - |  | - |  |  |  | - |  | - |  |  |  | (5.3) |  | (2.6) |
Other differences, net |  | 2.3 |  | (3.9) |  |  |  | (0.6) |  | (0.2) |  |  |  | 0.1 |  | 0.1 |
Total income tax expense and rate | $ | (11.8) |  | 20.1 | % |  | $ | 113.1 |  | 43.9 | % |  | $ | 64.0 |  | 31.2 | %
(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 U.S. Cellular recorded a $6.4 million increase to income tax expense related to a valuation allowance recorded against certain state deferred tax assets. In each interim period, U.S. Cellular 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, U.S. Cellular concluded that the negative evidence related to the realization of certain state deferred tax assets outweighed the positive evidence. Accordingly, U.S. Cellular 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.
Temporary income tax differences |
Significant components of U.S. Cellular’s deferred income tax assets and liabilities at December 31, 2014 and 2013 were as follows:
December 31, | 2014 |  | 2013 |
(Dollars in thousands) |  |  |  |  |  |
Deferred tax assets |  |  |  |  |  |
| Current deferred tax assets | $ | 96,886 |  | $ | 102,088 |
| Net operating loss (“NOL”) carryforwards |  | 72,878 |  |  | 61,294 |
| Stock-based compensation |  | 21,072 |  |  | 19,028 |
| Compensation and benefits - other |  | 2,586 |  |  | 3,746 |
| Deferred rent |  | 18,513 |  |  | 19,462 |
| Other |  | 26,116 |  |  | 24,604 |
| Total deferred tax assets |  | 238,051 |  |  | 230,222 |
| Less valuation allowance |  | (53,119) |  |  | (43,375) |
| Net deferred tax assets |  | 184,932 |  |  | 186,847 |
Deferred tax liabilities |  |  |  |  |  |
| Property, plant and equipment |  | 520,723 |  |  | 503,491 |
| Licenses/intangibles |  | 275,456 |  |  | 282,764 |
| Partnership investments |  | 149,371 |  |  | 133,931 |
| Other |  | 4,135 |  |  | 3,853 |
| Total deferred tax liabilities |  | 949,685 |  |  | 924,039 |
Net deferred income tax liability | $ | 764,753 |  | $ | 737,192 |
Deferred tax valuation allowance |
A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:
|  |  | 2014 |  | 2013 |  | 2012
(Dollars in thousands) |  |  |  |  |  |  |  |
Balance at January 1, | $ | 43,375 |  | $ | 41,295 |  | $ | 30,261
| Charged to income tax expense |  | 9,744 |  |  | (1,527) |  |  | 3,033
| Charged to other accounts |  | - |  |  | 3,607 |  |  | 8,001
Balance at December 31, | $ | 53,119 |  | $ | 43,375 |  | $ | 41,295
As of December 31, 2014, the valuation allowance reduced current deferred tax assets by $3.8 million and noncurrent deferred tax assets by $49.2 million.
Income tax unrecognized benefits summary |
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, | $ | 28,813 |  | $ | 26,460 |  | $ | 28,745
| Additions for tax positions of current year |  | 7,766 |  |  | 5,925 |  |  | 6,656
| Additions for tax positions of prior years |  | 154 |  |  | 1,501 |  |  | 854
| Reductions for tax positions of prior years |  | (554) |  |  | (45) |  |  | (115)
| Reductions for settlements of tax positions |  | - |  |  | (576) |  |  | -
| Reductions for lapses in statutes of limitations |  | (104) |  |  | (4,452) |  |  | (9,680)
Unrecognized tax benefits balance at December 31, | $ | 36,075 |  | $ | 28,813 |  | $ | 26,460

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