Time Warner Cable 2014 Annual Report Download - page 32

In addition, even if TWC bears no contractual responsibility for taxes related to a failure of the Separation Transactions to
qualify for their intended tax treatment, Treasury regulation section 1.1502-6 imposes on TWC several liability for all
Time Warner federal income tax obligations relating to the period during which TWC was a member of the Time Warner
federal consolidated tax group, including the date of the Separation Transactions. Similar provisions may apply under
foreign, state or local law. Absent TWC causing the Separation Transactions to not qualify as tax-free, Time Warner has
indemnified TWC against such several liability arising from a failure of the Separation Transactions to qualify for their
intended tax treatment.
Tax legislation and administrative initiatives or challenges to the Company’s tax positions could adversely affect the
Company’s results of operations and financial condition.
TWC operates in locations throughout the U.S. and, as a result, it is subject to the tax laws and regulations of the
U.S. federal, state and local governments. From time to time, various legislative and/or administrative initiatives may be
proposed that could adversely affect the Company’s tax positions. There can be no assurance that the Company’s effective
tax rate or tax payments will not be adversely affected by these initiatives. As a result of state and local budget shortfalls
due primarily to the economic environment as well as other considerations, certain states and localities have imposed or
are considering imposing new or additional taxes or fees on TWC’s services or changing the methodologies or base on
which certain fees and taxes are computed. Such potential changes include additional taxes or fees on TWC’s services that
could impact its customers, competitive position, combined reporting and other changes to general business taxes, central/
unit-level assessment of property taxes and other matters that could increase TWC’s income, franchise, sales, use and/or
property tax liabilities. Also, failure to extend the ITFA moratorium, which expires on September 30, 2015, could result in
additional state and local taxes on broadband services. In addition, U.S. federal, state and local tax laws and regulations
are extremely complex and subject to varying interpretations. There can be no assurance that TWC’s tax positions will not
be challenged by relevant tax authorities or that TWC would be successful in any such challenge.
Applicable law is subject to change.
The exact requirements of applicable law are not always clear, and the rules affecting TWC’s businesses are always
subject to change. For example, the FCC may interpret its rules and regulations in enforcement proceedings in a manner
that is inconsistent with the judgments TWC has made. Likewise, regulators and legislators at all levels of government
may sometimes change existing rules or establish new rules governing topics such as privacy and information security or
environmental protection, including regulations in response to concerns about climate change or cybersecurity, among
others. In addition, Congress considers new legislative requirements for cable operators virtually every year, and there is
always a risk that such proposals will ultimately be enacted. Federal, state or local governments and/or tax authorities may
change tax laws, regulations or administrative practices that could negatively impact TWC’s operating results and
financial condition. See “Business—Regulatory Matters.”
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
TWC’s principal physical assets consist of operating plant and equipment, including signal receiving, encoding and
decoding devices, two national centers and distribution systems and equipment at or near subscribers’ homes for each of
TWC’s cable systems. The signal receiving apparatus typically includes a tower antenna, ancillary electronic equipment,
earth stations for reception of satellite signals and terrestrial fiber interconnects. TWC’s distribution system consists
primarily of fiber optic and coaxial cables, lasers, routers, switches and related electronic equipment. TWC distributes
video signals via the Company’s video-specific infrastructure and increasingly over the Company’s high-speed data
infrastructure. TWC’s cable plant and related equipment generally are either attached to utility poles under pole rental
agreements with local public utilities or the distribution cable is buried in underground ducts or trenches. Customer
premise equipment consists principally of set-top boxes and cable modems. The physical components of cable systems
require periodic maintenance.
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