US Cellular 2008 Annual Report Download - page 174

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 INCOME TAXES (Continued)
Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the
Consolidated Balance Sheet.
As of December 31, 2008, U.S. Cellular believes it is reasonably possible that unrecognized tax benefits
could change in the next twelve months. The nature of the uncertainty relates to the exclusion of certain
transactions from state income taxes due primarily to anticipated closure of state income tax audits and
the expiration of statutes of limitation. It was anticipated that these events could reduce unrecognized tax
benefits in the range of $0.2 million to $3.4 million.
U.S. Cellular recognizes accrued interest and penalties related to unrecognized tax benefits in income tax
expense. The amounts charged to income tax expense totaled $4.4 million and $2.6 million in 2008 and
2007, respectively. Accrued interest and penalties were $13.2 million and $8.8 million at December 31,
2008 and 2007, respectively.
U.S. Cellular is included in TDS’ consolidated federal income tax return. U.S. Cellular also files various
state and local income tax returns. With few exceptions, U.S. Cellular is no longer subject to federal,
state and local income tax examinations by tax authorities for years prior to 2002. TDS’ consolidated
federal income tax returns for the years 2002 - 2007, which include U.S. Cellular, are currently under
examination by the Internal Revenue Service. Also, certain of U.S. Cellular’s state income tax returns are
under examination by various state taxing authorities.
NOTE 4 VARIABLE INTEREST ENTITIES
From time to time, the FCC conducts auctions through which additional spectrum is made available for
the provision of wireless services. U.S. Cellular participated in spectrum auctions indirectly through its
interests in Aquinas Wireless L.P. (‘‘Aquinas Wireless’’), King Street Wireless L.P. (‘‘King Street Wireless’’),
Barat Wireless L.P. (‘‘Barat Wireless’’) and Carroll Wireless L.P. (‘‘Carroll Wireless’’), collectively, the
‘‘limited partnerships.’’ Each entity qualified as a ‘‘designated entity’’ and thereby was eligible for bid
credits with respect to licenses purchased in accordance with the rules defined by the FCC for each
auction. In most cases, the bidding credits resulted in a 25% discount from the gross winning bid. Some
licenses were ‘‘closed licenses,’’ for which no credit was received, but bidding was restricted to bidders
qualifying as ‘‘entrepreneurs,’’ which are small businesses that have a limited amount of assets and
revenues.
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