Frontier Communications 2014 Annual Report Download - page 88

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(11) 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, 2014, 2013 and 2012:
2014 2013 2012
Consolidated tax provision at federal statutory rate . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
State income tax provisions, net of federal income tax benefit . . . . 1.6 (2.7) 2.4
Noncontrolling interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (0.6) (2.5)
Tax reserve adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 (1.1) (5.4)
Domestic production activities deduction . . . . . . . . . . . . . . . . . . . . . . . . . (8.7) — —
Changes in certain deferred tax balances . . . . . . . . . . . . . . . . . . . . . . . . (14.1) (4.0) 3.1
IRS audit adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.2 —
Federal research and development credit . . . . . . . . . . . . . . . . . . . . . . . . (3.3) (3.2) —
Non-deductible transaction costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 2.0 —
All other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.4 0.4
Effective tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7% 29.0% 33.0%
Income taxes for 2014 include the impact of a $23 million benefit from the reduction in deferred tax
liabilities arising primarily from the inclusion of the Connecticut operations in the state unitary filings, a
$14 million benefit from the domestic production activities deduction and a $5 million benefit from
federal research and development credits, partially offset by the impact of a charge of $11 million
resulting from an increase in tax reserves and a charge of $2 million resulting from non-deductible
transaction costs.
Income taxes for 2013 reflect the impact of a $7 million net benefit resulting from the adjustment of
deferred tax balances, a $5 million benefit from federal research and development credits and a
$2 million benefit from the net reversal of reserves for uncertain tax positions, partially offset by the
impact of a charge of $5 million resulting from the settlement of the 2010 IRS audit, and a charge of
$3 million resulting from non-deductible transaction costs.
Income taxes for 2012 include the net reversal of reserves for uncertain tax positions for
$12 million. Deferred tax balances were increased in 2012 to reflect changes in estimates and changes
in state effective rates and filing methods.
F-27
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements