AT&T Wireless 2015 Annual Report Download - page 67

AT&T INC. | 65
NOTE 11. INCOME TAXES
Significant components of our deferred tax liabilities (assets)
are as follows at December 31:
2015 2014
Depreciation and amortization $ 59,879 $ 47,082
Intangibles (nonamortizable) 6,920 1,874
Employee benefits (10,517) (11,679)
Deferred fulfillment costs 2,172 2,035
Net operating loss and other carryforwards (4,029) (2,126)
Other – net (1,478) 68
Subtotal 52,947 37,254
Deferred tax assets valuation allowance 2,141 1,182
Net deferred tax liabilities $ 55,088 $ 38,436
Noncurrent deferred tax liabilities $ 56,181 $ 38,436
Less: Noncurrent deferred tax assets (1,093) —
Net deferred tax liabilities $ 55,088 $ 38,436
At December 31, 2015, we had combined net operating
loss carryforwards (tax effected) for federal income tax
purposes of $106, state of $851 and foreign of $1,676,
expiring through 2031. Additionally, we had federal credit
carryforwards of $134 and state credit carryforwards of
$1,262, expiring primarily through 2035. The increase in our
net operating loss carryforwards was primarily due to our
acquisitions of GSF Telecom, Nextel Mexico and DIRECTV.
We recognize a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some
portion, or all, of a deferred tax asset will not be realized.
Our valuation allowances at December 31, 2015 and 2014
related primarily to state and foreign net operating losses
and state credit carryforwards. The increase in our valuation
allowance was primarily due to our 2015 acquisitions.
We recognize the financial statement effects of a tax
return position when it is more likely than not, based on
the technical merits, that the position will ultimately be
sustained. For tax positions that meet this recognition
threshold, we apply our judgment, taking into account
applicable tax laws, our experience in managing tax audits
and relevant GAAP, to determine the amount of tax benefits
to recognize in our financial statements. For each position,
the difference between the benefit realized on our tax
return and the benefit reflected in our financial statements
is recorded on our consolidated balance sheets as an
unrecognized tax benefit (UTB). We update our UTBs at
each financial statement date to reflect the impacts of
audit settlements and other resolutions of audit issues,
the expiration of statutes of limitation, developments in
tax law and ongoing discussions with taxing authorities.
A reconciliation of the change in our UTB balance from
January 1 to December 31 for 2015 and 2014 is as follows:
Federal, State and Foreign Tax 2015 2014
Balance at beginning of year $ 4,465 $ 4,227
Increases for tax positions
related to the current year 1,333 470
Increases for tax positions
related to prior years 660 484
Decreases for tax positions
related to prior years (396) (657)
Lapse of statute of limitations (16) (38)
Settlements 10 (21)
Current year acquisitions 864 —
Foreign currency effects (22) —
Balance at end of year 6,898 4,465
Accrued interest and penalties 1,138 973
Gross unrecognized income tax benefits 8,036 5,438
Less: Deferred federal and state
income tax benefits (582) (434)
Less: Tax attributable to timing
items included above (3,460) (2,400)
Less: UTBs included above that relate
to acquisitions that would impact
goodwill if recognized during the
measurement period (842) —
Total UTB that, if recognized, would
impact the effective income tax
rate as of the end of the year $ 3,152 $ 2,604
Periodically we make deposits to taxing jurisdictions which
reduce our UTB balance but are not included in the
reconciliation above. The amount of deposits that reduced
our UTB balance was $3,027 at December 31, 2015, and
$2,258 at December 31, 2014.
Accrued interest and penalties included in UTBs were $1,138
as of December 31, 2015, and $973 as of December 31,
2014. We record interest and penalties related to federal,
state and foreign UTBs in income tax expense. The net
interest and penalty expense (benefit) included in income tax
expense was $83 for 2015, $(64) for 2014, and $35 for 2013.
We file income tax returns in the U.S. federal jurisdiction
and various state, local and foreign jurisdictions. As a large
taxpayer, our income tax returns are regularly audited by the
Internal Revenue Service (IRS) and other taxing authorities.
The IRS has completed field examinations of our tax returns
through 2010. All audit periods prior to 2003 are closed for
federal examination purposes. Contested issues from our 2003
through 2010 returns are at various stages of resolution with
the IRS Appeals Division; we are unable to estimate the
impact the resolution of these issues may have on our UTBs.