Time Magazine 2015 Annual Report Download - page 106

TIME WARNER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The differences between income taxes expected at the U.S. federal statutory income tax rate of 35% and income taxes
provided are as set forth below (millions):
Year Ended December 31,
2015 2014 2013
Taxes on income at U.S. federal statutory rate ..................... $ 1,906 $ 1,638 $ 1,739
State and local taxes, net of federal tax effects ..................... 68 64 72
Domestic production activities deduction ......................... (101) (114) (133)
Foreign rate differential ....................................... (129) (20) (10)
Federal tax settlement ........................................ — (687) —
Valuation allowances ........................................ (29) (226) 3
Other ..................................................... (64) 130 (57)
Total ...................................................... 1,651 785 1,614
Significant components of Time Warner’s net deferred tax liabilities are as follows (millions):
December 31,
2015 2014
Deferred tax assets:
Tax attribute carryforwards(a) ................................................ $ 299 $ 305
Receivable allowances and return reserves ...................................... 158 168
Royalties, participations and residuals ......................................... 457 429
Equity-based compensation .................................................. 188 218
Amortization ............................................................. 36 231
Other ................................................................... 1,322 1,407
Valuation allowances(a) .................................................... (233) (275)
Total deferred tax assets .................................................... $ 2,227 $ 2,483
Deferred tax liabilities:
Assets acquired in business combinations ....................................... $ 2,817 $ 2,874
Unbilled television receivables ............................................... 1,117 998
Depreciation .............................................................. 235 264
Other ................................................................... 378 367
Total deferred tax liabilities .................................................. 4,547 4,503
Net deferred tax liability .................................................... $ 2,320 $ 2,020
(a) The Company has recorded valuation allowances for certain tax attribute carryforwards and other deferred tax assets due to uncertainty that exists
regarding future realizability. The tax attribute carryforwards consist of $47 million of tax credits, $41 million of capital losses and $211 millionof
net operating losses that expire in varying amounts from 2016 through 2035. If, in the future, the Company believes that it is more likely than not that
these deferred tax benefits will be realized, the valuation allowances will be recognized in the Consolidated Statement of Operations.
U.S. income and foreign withholding taxes have not been recorded on permanently reinvested earnings of certain
foreign subsidiaries aggregating approximately $1.1 billion at December 31, 2015. Determination of the amount of
unrecognized deferred U.S. income tax liability with respect to such earnings is not practicable.
For accounting purposes, the Company records equity-based compensation expense and a related deferred tax asset for
the future tax deductions it may receive. For income tax purposes, the Company receives a tax deduction equal to the stock
price on the date that an RSU (or PSU) vests or the excess of the stock price over the exercise price of an option upon
exercise. The deferred tax asset consists of amounts relating to individual unvested and/or unexercised equity-based
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