Cincinnati Bell 2008 Annual Report Download - page 190

The components of the Company’s deferred tax assets and liabilities are as follows:
December 31,
(dollars in millions) 2008 2007
Deferred tax assets:
Net operating loss carryforwards ............................. $505.1 $ 626.9
Pension and postretirement benefits .......................... 178.9 119.7
Other .................................................. 67.7 63.3
Total deferred tax assets ................................... 751.7 809.9
Valuation allowance ....................................... (72.9) (140.0)
Total deferred income tax assets, net of valuation allowance ....... 678.8 669.9
Deferred tax liabilities:
Property, plant and equipment ............................... 108.8 65.9
Federal deferred liability on state deferred tax assets ............. 6.6 7.0
Other .................................................. 0.4 0.8
Total deferred tax liabilities ................................. 115.8 73.7
Net deferred tax assets ................................... $563.0 $ 596.2
As of December 31, 2008, the Company had approximately $1.3 billion of federal operating loss tax
carryforwards, with a deferred tax asset value of approximately $439.1 million, and approximately $66.0 million
in deferred tax assets related to state and local operating loss tax carryforwards. The majority of the remaining
tax loss carryforwards will generally expire between 2017 and 2023. U.S. tax laws limit the annual utilization of
tax loss carryforwards of acquired entities. These limitations should not materially impact the utilization of the
tax carryforwards.
The ultimate realization of the deferred income tax assets depends upon the Company’s ability to generate
future taxable income during the periods in which basis differences and other deductions become deductible, and
prior to the expiration of the net operating loss carryforwards. Due to its historical and future projected earnings,
the Company believes it will utilize future federal deductions and available net operating loss carryforwards prior
to their expiration. The Company also concluded that it was more likely than not that certain state tax loss
carryforwards would not be realized based upon the analysis described above and therefore provided a valuation
allowance. The reduction in valuation allowance in 2008 relates primarily to the write off of Ohio net operating
loss carryforwards, which were fully reserved, pursuant to the elimination of the Ohio corporate income tax
during 2008.
The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes,” (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, the Company
recognized a $5.1 million increase in the liability for unrecognized tax benefits, which was accounted for as an
increase to the January 1, 2007 accumulated deficit balance. The total amount of unrecognized tax benefits that,
if recognized, would affect the effective tax rate is $14.5 million at December 31, 2007 and $15.3 million at
December 31, 2008. The Company does not currently anticipate that the amount of unrecognized tax benefits
will change significantly over the next year. A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
(dollars in millions)
Unrecognized tax benefits balance at January 1, 2007 ........................ $14.7
Changes for tax positions for prior years ................................... 0.1
Unrecognized tax benefits balance at December 31, 2007 ..................... $14.8
Changes for tax positions for the current year ............................... 0.8
Unrecognized tax benefits balance at December 31, 2008 ..................... $15.6
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