Cincinnati Bell 2013 Annual Report Download - page 188

The components of our deferred tax assets and liabilities are as follows:
December 31,
(dollars in millions) 2013 2012
Deferred tax assets:
Net operating loss carryforwards ............................................... $452.3 $410.8
Pension and postretirement benefits ............................................. 81.9 144.6
Equity method investment in CyrusOne .......................................... 41.5 —
Other ..................................................................... 63.2 69.9
Total deferred tax assets ...................................................... 638.9 625.3
Valuation allowance ......................................................... (68.3) (56.8)
Total deferred tax assets, net of valuation allowance .................................. $570.6 $568.5
Deferred tax liabilities:
Property, plant and equipment ................................................. $171.8 $125.1
Federal deferred liability on state deferred tax assets ................................ 3.5 7.2
Other ..................................................................... 0.3 1.6
Total deferred tax liabilities ................................................... 175.6 133.9
Net deferred tax assets ...................................................... $395.0 $434.6
As of December 31, 2013, the Company had approximately $1.1 billion of federal tax operating loss
carryforwards with a deferred tax asset value of $388.4 million, alternative minimum tax credit carryforwards of
$16.5 million, state tax credits of $11.1 million, and $63.9 million in deferred tax assets related to state, local,
and foreign tax operating loss carryforwards. The majority of the remaining tax loss carryforwards will generally
expire between 2021 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,
management believes it will utilize future federal deductions and available net operating loss carryforwards prior
to their expiration. Management also concluded that it was more likely than not that certain state and foreign tax
loss carryforwards would not be realized based upon the analysis described above and therefore provided a
valuation allowance.
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $23.5
million at December 31, 2013 and $22.3 million at December 31, 2012. We do not currently anticipate that the
amount of unrecognized tax benefits will change significantly over the next year. Accrued interest and penalties
on income tax uncertainties were immaterial as of December 31, 2013 and 2012.
A reconciliation of the unrecognized tax benefits is as follows:
Year Ended December 31,
(dollars in millions) 2013 2012 2011
Balance, beginning of year .................................................. $22.8 $21.8 $20.5
Change in tax positions for the current year .................................... 1.3 1.4 1.3
Change in tax positions for prior years ........................................ — (0.4) —
Balance, end of year ....................................................... $24.1 $22.8 $21.8
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various
foreign, state and local jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal,
state or local examinations for years before 2010.
108
Form 10-K Part II Cincinnati Bell Inc.