Frontier Communications 2012 Annual Report Download - page 86

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(12) Income Taxes:
The following is a reconciliation of the provision for income taxes computed at federal statutory rates to
the effective rates for the years ended December 31, 2012, 2011 and 2010:
2012 2011 2010
Consolidated tax provision at federal statutory rate . ..................... 35.0% 35.0% 35.0%
State income tax provisions, net of federal income tax benefit ........... 2.4 4.0 4.7
Tax reserve adjustment ................................................ (5.4) (4.0) (0.3)
Changes in certain deferred tax balances . ............................... 3.1 (2.7) (1.0)
Noncontrolling interest ................................................. (2.5) (1.1) (0.4)
Reversal of tax credits ................................................. — 4.4 —
Non-deductible transaction costs ........................................ — — 4.2
All other, net.......................................................... 0.4 0.3 0.3
Effective tax rate ...................................................... 33.0% 35.9% 42.5%
Income taxes for 2012 and 2011 include the net reversal of reserves for uncertain tax positions for $12.3
million and $9.9 million, respectively. Deferred tax balances were increased in 2012 to reflect changes in
estimates and changes in state effective rates and filing methods.
Income taxes for 2011 include the reduction of deferred tax balances based on the application of enacted
state tax statutes for $6.8 million, partially offset by the impact of a $10.8 million charge resulting from the
enactment on May 25, 2011 of the Michigan Corporate Income Tax that eliminated certain future tax
deductions.
During 2010, Frontier reduced certain deferred tax assets of $11.3 million related to Transaction costs
which were not tax deductible. These costs were incurred to facilitate the Transaction and as such had to be
capitalized for tax purposes. Income taxes for 2010 also include the impact of a $4.1 million charge resulting
from health care reform legislation associated with the passage of the Patient Protection and Affordable Care
Act and of the Health Care and Education Reconciliation Act of 2010 (the Acts). The health care reform
legislation enacted in March 2010 under the Acts eliminated the tax deduction for the subsidy that the
Company receives under Medicare Part D for prescription drug costs.
F-25
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements