Frontier Communications 2013 Annual Report Download - page 89

The provision (benefit) for federal and state income taxes, as well as the taxes charged or credited to
shareholders’ equity of Frontier, includes amounts both payable currently and deferred for payment in future
periods as indicated below:
($ in thousands) 2013 2012 2011
Income taxes charged to the consolidated statement of
operations:
Current:
Federal. . ............................................ $ 54,915 $ (3,824) $(13,320)
State ................................................ (163) (1,039) 14,252
Total Current ................................... 54,752 (4,863) 932
Deferred:
Federal. . ............................................ 12,699 53,642 77,750
State ................................................ (20,209) 26,859 9,661
Total Deferred .................................. (7,510) 80,501 87,411
Total income taxes charged to the consolidated statement of
operations .................................................. 47,242 75,638 88,343
Income taxes charged (credited) to shareholders’ equity of
Frontier:
Utilization of the benefits arising from restricted stock ..... 1,910 2,937 —
Deferred income taxes (benefits) arising from the
recognition of additional pension/OPEB liability . ........ 132,432 (58,551) (97,409)
Total income taxes charged (credited) to shareholders’ equity of
Frontier .................................................... 134,342 (55,614) (97,409)
Total income taxes............................................ $181,584 $ 20,024 $ (9,066)
In 2011, we received refunds of $53.9 million generated in part by the 2009 retroactive change in
accounting method for repairs and maintenance costs related to tax years 2008 and prior.
U.S. GAAP requires applying a “more likely than not” threshold to the recognition and derecognition of
uncertain tax positions either taken or expected to be taken in the Company’s income tax returns. The total
amount of our gross tax liability for tax positions that may not be sustained under a “more likely than not”
threshold amounts to $9.3 million as of December 31, 2013 including interest of $0.6 million. The amount of
our uncertain tax positions for which the statutes of limitations are expected to expire during the next twelve
months and which would affect our effective tax rate is $2.4 million as of December 31, 2013.
The Company’s policy regarding the classification of interest and penalties is to include these amounts as
a component of income tax expense. This treatment of interest and penalties is consistent with prior periods.
We have recognized in our consolidated statement of operations for the year ended December 31, 2011, a net
reduction in interest in the amount of $2.1 million. We are subject to income tax examinations generally for the
years 2012 forward for federal and 2005 forward for state filing jurisdictions. We also maintain uncertain tax
positions in various state jurisdictions.
The following table sets forth the changes in the Company’s balance of unrecognized tax benefits for the
years ended December 31, 2013 and 2012:
($ in thousands) 2013 2012
Unrecognized tax benefits—beginning of year .............................. $11,487 $ 33,928
Gross increases—current year tax positions. . . .............................. 4,554 3,381
Gross decreases—expired statute of limitations ............................. (7,282) (25,822)
Unrecognized tax benefits—end of year .................................... $ 8,759 $ 11,487
F-27
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements