US Cellular 2013 Annual Report Download - page 57

United States Cellular Corporation
Notes to Consolidated Financial Statements (Continued)
NOTE 3 INCOME TAXES (Continued)
At December 31, 2013, U.S. Cellular and certain subsidiaries had $1,149.4 million of state NOL
carryforwards (generating a $51.1 million deferred tax asset) available to offset future taxable income.
The state NOL carryforwards expire between 2014 and 2033. Certain subsidiaries had federal NOL
carryforwards (generating a $10.2 million deferred tax asset) available to offset their future taxable
income. The federal NOL carryforwards expire between 2018 and 2033. A valuation allowance was
established for certain state NOL carryforwards and federal NOL carryforwards since it is more likely than
not that a portion of such carryforwards will expire before they can be used.
A summary of U.S. Cellular’s deferred tax asset valuation allowance is as follows:
2013 2012 2011
(Dollars in thousands)
Balance at January 1, ...................................... $41,295 $30,261 $29,891
Charged to income tax expense ............................. (1,527) 3,033 (1,450)
Charged to other accounts ................................. 3,607 8,001 1,820
Balance at December 31, ................................... $43,375 $41,295 $30,261
As of December 31, 2013, the valuation allowance reduced current deferred tax assets by $3.0 million
and noncurrent deferred tax assets by $40.4 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
2013 2012 2011
(Dollars in thousands)
Unrecognized tax benefits balance at January 1, ................... $26,460 $28,745 $32,547
Additions for tax positions of current year ...................... 5,925 6,656 4,487
Additions for tax positions of prior years ....................... 1,501 854 332
Reductions for tax positions of prior years ...................... (45) (115) (1,104)
Reductions for settlements of tax positions ..................... (576) — (244)
Reductions for lapses in statutes of limitations ................... (4,452) (9,680) (7,273)
Unrecognized tax benefits balance at December 31, ................ $28,813 $26,460 $28,745
Unrecognized tax benefits are included in Accrued taxes and Other deferred liabilities and credits in the
Consolidated Balance Sheet. If these benefits were recognized, they would have reduced income tax
expense in 2013, 2012 and 2011 by $18.7 million, $17.2 million and $18.7 million, respectively, net of the
federal benefit from state income taxes. As of December 31, 2013, U.S. Cellular does not expect
unrecognized tax benefits to change significantly in the next twelve months.
U.S. Cellular recognizes accrued interest and penalties related to unrecognized tax benefits in Income tax
expense. The amounts charged to Income tax expense related to interest and penalties resulted in an
expense of $0.6 million in 2013, and a benefit of $2.2 million and $2.6 million in 2012 and 2011,
respectively. Net accrued interest and penalties were $12.3 million and $12.8 million at December 31,
2013 and 2012, 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. The TDS consolidated group remains subject to federal income tax
audits for the tax years after 2011. With only a few exceptions, TDS is no longer subject to state income
tax audits for years prior to 2009.
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