Frontier Communications 2014 Annual Report Download - page 90

The provision (benefit) for federal and state income taxes, as well as the taxes charged or credited
to equity of Frontier, includes amounts both payable currently and deferred for payment in future
periods as indicated below:
($ in thousands) 2014 2013 2012
Income tax expense:
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,288 $ 54,915 $ (3,824)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,132 (163) (1,039)
Total Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,420 54,752 (4,863)
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,205) 12,699 53,642
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43,671) (20,209) 26,859
Total Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,876) (7,510) 80,501
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,544 47,242 75,638
Income taxes charged (credited) to equity of Frontier:
Utilization of the benefits arising from restricted
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (472) 1,910 2,937
Deferred income taxes (benefits) arising from the
recognition of additional pension/OPEB liability. . . . (90,410) 132,432 (58,551)
Total income taxes charged (credited) to equity of
Frontier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,882) 134,342 (55,614)
Total income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (60,338) $181,584 $ 20,024
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 $20 million as of December 31, 2014
including interest of $1 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 $3 million as of December 31, 2014.
The Company’s policy regarding the classification of interest and penalties is to include these
amounts as a component of income tax expense. This treatment of interest and penalties is consistent
with prior periods. We are subject to income tax examinations generally for the years 2012 forward for
federal and 2008 forward for state filing jurisdictions. We also maintain uncertain tax positions in
various state jurisdictions.
The following table sets forth the changes in the Company’s balance of unrecognized tax benefits
for the years ended December 31, 2014 and 2013:
($ in thousands) 2014 2013
Unrecognized tax benefits—beginning of year . . . . . . . . . . . . . . . . . . . . . . . . $ 8,759 $11,487
Gross increases—current year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . 12,878 4,554
Gross decreases—expired statute of limitations. . . . . . . . . . . . . . . . . . . . . . . (2,379) (7,282)
Unrecognized tax benefits—end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,258 $ 8,759
The amounts above exclude $1 million of accrued interest as of December 31, 2014 and 2013,
respectively, that we have recorded and would be payable should the Company’s tax positions not be
sustained.
F-29
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements