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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 5 Income Taxes UScellular is included in a consolidated federal income tax return and in certain state income tax returns with other members of the TDS consolidated group. For financial statement purposes, UScellular and its subsidiaries compute their income tax expense as if they comprised a separate affiliated group and were not included in the TDS consolidated group. UScellular’s current income taxes balances at December 31, 2024 and 2023, were as follows:
December 31, | 2024 |  | 2023
(Dollars in millions) |  |  |
Federal income taxes receivable (payable) | $ | (1) |  |  | $ | 1 |
Net state income taxes receivable | — |  |  | — |
Income tax expense (benefit) is summarized as follows:
Year Ended December 31, | 2024 |  | 2023 |  | 2022
(Dollars in millions) |  |  |  |  |
Current |  |  |  |  |
Federal | $ | 37 |  |  | $ | 2 |  |  | $ | 1 |
State | (1) |  |  | 4 |  |  | 3 |
Deferred |  |  |  |  |
Federal | (33) |  |  | 28 |  |  | 19 |
State | 7 |  |  | 19 |  |  | 14 |
Total income tax expense (benefit) | $ | 10 |  |  | $ | 53 |  |  | $ | 37 |
A reconciliation of UScellular’s income tax expense computed at the statutory rate to the reported income tax expense, and the statutory federal income tax rate to UScellular’s effective income tax rate is as follows:
Year Ended December 31, | 2024 |  | 2023 |  | 2022
| Amount |  | Rate |  | Amount |  | Rate |  | Amount |  | Rate
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |
Statutory federal income tax expense and rate | $ | (5) |  |  | 21.0 | % |  | $ | 23 |  |  | 21.0 | % |  | $ | 15 |  |  | 21.0 | %
State income taxes, net of federal benefit 1 | 4 |  |  | (19.8) |  |  | 18 |  |  | 16.7 |  |  | 14 |  |  | 18.9 |
Change in federal valuation allowance 2 | 9 |  |  | (41.5) |  |  | 8 |  |  | 7.5 |  |  | 7 |  |  | 9.9 |
Nondeductible compensation | 2 |  |  | (7.4) |  |  | 4 |  |  | 3.5 |  |  | 3 |  |  | 3.6 |
Other differences, net | — |  |  | 4.6 |  |  | — |  |  | (1.0) |  |  | (2) |  |  | (1.9) |
Total income tax expense (benefit) and rate | $ | 10 |  |  | (43.1) | % |  | $ | 53 |  |  | 47.7 | % |  | $ | 37 |  |  | 51.5 | %
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 2022 and 2023 include discrete valuation allowance adjustments that did not recur in 2024. 2 Change in federal valuation allowance is due primarily to annual interest expense from partnership investments that carryforward but may not be realized. Significant components of UScellular’s deferred income tax assets and liabilities at December 31, 2024 and 2023, were as follows:
December 31, | 2024 |  | 2023
(Dollars in millions) |  |  |
Deferred tax assets |  |  |
Net operating loss (NOL) carryforwards | $ | 142 |  |  | $ | 132 |
Lease liabilities | 238 |  |  | 239 |
Contract liabilities | 58 |  |  | 59 |
Interest expense carryforwards | 125 |  |  | 99 |
Asset retirement obligation | 84 |  |  | 78 |
Other | 65 |  |  | 62 |
Total deferred tax assets | 712 |  |  | 669 |
Less valuation allowance | (181) |  |  | (146) |
Net deferred tax assets | 531 |  |  | 523 |
Deferred tax liabilities |  |  |
Property, plant and equipment | 389 |  |  | 434 |
Licenses/intangibles | 421 |  |  | 408 |
Partnership investments | 191 |  |  | 180 |
Lease assets | 224 |  |  | 221 |
Other | 34 |  |  | 35 |
Total deferred tax liabilities | 1,259 |  |  | 1,278 |
Net deferred income tax liability | $ | 728 |  |  | $ | 755 |
At December 31, 2024, UScellular and certain subsidiaries had $31 million of federal NOL carryforwards (generating a $7 million deferred tax asset) whose future utilization is subject to certain limitations. The federal NOL carryforwards generally expire between 2025 and 2038, with the exception of federal NOLs generated after 2017, which do not expire. UScellular and certain subsidiaries had $3,158 million of state NOL carryforwards (generating a $136 million deferred tax asset) available to offset future taxable income. The state NOL carryforwards generally expire between 2025 and 2044. 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, 2024, UScellular and certain subsidiaries had $473 million of federal interest expense carryforwards (generating a $99 million deferred tax asset) available to offset future taxable income. The federal interest expense carryforwards do not expire. UScellular and certain subsidiaries had $652 million of state interest expense carryforwards (generating a $25 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 UScellular’s deferred tax asset valuation allowance is as follows:
| 2024 |  | 2023 |  | 2022
(Dollars in millions) |  |  |  |  |
Balance at beginning of year | $ | 146 |  |  | $ | 115 |  |  | $ | 83 |
Charged to Income tax expense | 35 |  |  | 31 |  |  | 32 |
Balance at end of year | $ | 181 |  |  | $ | 146 |  |  | $ | 115 |
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2024 |  | 2023 |  | 2022
(Dollars in millions) |  |  |  |  |
Unrecognized tax benefits balance at beginning of year | $ | 35 |  |  | $ | 35 |  |  | $ | 35 |
Additions for tax positions of current year | 6 |  |  | 9 |  |  | 5 |
Additions for tax positions of prior years | — |  |  | — |  |  | 1 |
Reductions for tax positions of prior years | (6) |  |  | (3) |  |  | — |
Reductions for lapses in statutes of limitations | (7) |  |  | (6) |  |  | (6) |
Unrecognized tax benefits balance at end of year | $ | 28 |  |  | $ | 35 |  |  | $ | 35 |
Unrecognized tax benefits are included in 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 by $23 million, $28 million and $28 million in 2024, 2023 and 2022, respectively. UScellular 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 were immaterial in 2024, 2023 and 2022. Net accrued liabilities for interest and penalties were $13 million at December 31, 2024 and 2023, and are included in Other deferred liabilities and credits in the Consolidated Balance Sheet. UScellular is included in TDS’ consolidated federal and certain state income tax returns. UScellular also files certain state and local income tax returns separately from TDS. With limited exceptions, TDS and UScellular are no longer subject to federal and state income tax audits for the years prior to 2021.

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