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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income taxes receivable (payable)

U.S. Cellular’s current income taxes balances at December 31, 2017 and 2016, were as follows:

December 31,	2017			2016
(Dollars in millions)
Federal income taxes payable	$	22		$	8
Net state income taxes payable		1			–

Income tax expense (benefit)

Income tax expense (benefit) is summarized as follows:

Year Ended December 31,			2017			2016			2015
(Dollars in millions)
Current
	Federal		$	68		$	29		$	97
	State			10			(2)			5
Deferred
	Federal			(354)			1			48
	State			(11)			5			7
		Total income tax expense (benefit)	$	(287)		$	33		$	157

Income tax reconciliation

A reconciliation of U.S. Cellular’s income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax expense rate to U.S. Cellular’s effective income tax expense rate is as follows:

Year Ended December 31,		2017						2016						2015
		Amount			Rate			Amount			Rate			Amount			Rate
(Dollars in millions)
Statutory federal income tax expense and rate		$	(95)		35.0	%		$	29		35.0	%		$	141		35.0	%
State income taxes, net of federal benefit1			(4)		1.4				3		3.6				8		2.1
Effect of noncontrolling interests			(2)		0.8				(1)		(1.1)				3		0.6
Federal income tax rate change2			(254)		93.3				–		–				–		–
Goodwill impairment3			71		(26.2)				–		–				–		–
Other differences, net			(3)		1.2				2		2.2				5		1.0
Total income tax expense (benefit) and rate		$	(287)		105.5	%		$	33		39.7	%		$	157		38.7	%
1	State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance.
2	Federal income tax rate change due to the Tax Act reducing the federal income tax rate from 35% to 21% and a corresponding reduction to the deferred tax liability.  The amount is slightly different from the total impact of the federal tax rate change because the rate change also impacts the amount of State income taxes, net of federal benefit.
3	Goodwill impairment reflects an adjustment to increase income tax expense by $71 million related to a 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.

Deferred income tax assets and liabilities

Significant components of U.S. Cellular’s deferred income tax assets and liabilities at December 31, 2017 and 2016, were as follows:

December 31,		2017			2016
(Dollars in millions)
Deferred tax assets
	Net operating loss (NOL) carryforwards	$	103		$	88
	Stock-based compensation		20			26
	Compensation and benefits - other		5			21
	Deferred rent		21			21
	Other		59			56
Total deferred tax assets			208			212
	Less valuation allowance		(77)			(65)
Net deferred tax assets			131			147
Deferred tax liabilities
	Property, plant and equipment		276			473
	Licenses/intangibles		192			326
	Partnership investments		123			173
	Total deferred tax liabilities		591			972
Net deferred income tax liability		$	460		$	825
Presented in the Consolidated Balance Sheet as:
Deferred income tax liability, net		$	461		$	826
Other assets and deferred charges			(1)			(1)
	Net deferred income tax liability	$	460		$	825

Deferred tax valuation allowance

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

		2017			2016			2015
(Dollars in millions)
Balance at beginning of year		$	65		$	55		$	53
	Charged to income tax expense		12			10			2
Balance at end of year		$	77		$	65		$	55

Income tax unrecognized benefits summary

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

		2017			2016			2015
(Dollars in millions)
Unrecognized tax benefits balance at beginning of year		$	43		$	39		$	36
	Additions for tax positions of current year		6			12			7
	Additions for tax positions of prior years		1			3			1
	Reductions for tax positions of prior years		(1)			(1)			–
	Reductions for lapses in statutes of limitations		(2)			(10)			(5)
Unrecognized tax benefits balance at end of year		$	47		$	43		$	39

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Tabular disclosure for 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 and other income tax contingencies. Includes, but is not limited to, interest and penalties, reconciliation of unrecognized tax benefits, unrecognized tax benefits that would affect the effective tax rate, tax years that remain subject to examination by tax jurisdictions, and information about positions for which it is reasonably possible that amounts unrecognized will significantly change within 12 months.

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