US Cellular 2015 Annual Report Download - page 83

TDS assesses the collectability of the equipment installment plan receivables based on historical payment experience,
account aging and other qualitative factors and provides an allowance for estimated losses. The credit profiles of TDS
customers on equipment installment plans are similar to those of TDS customers with traditional subsidized plans.
Customers with a higher risk credit profile are required to make a deposit for equipment purchased through an
installment contract.
TDS recorded out-of-period adjustments in 2015 due to errors related to equipment installment plan transactions that
were attributable to 2014. TDS has determined that these adjustments were not material to prior annual periods, and
also were not material to the current year results. These equipment installment plan adjustments had the impact of
reducing Equipment sales revenues by $6.2 million and Income before income taxes by $5.8 million in 2015.
NOTE 4 INCOME TAXES
TDS’ current income taxes balances at December 31, 2015 and 2014 were as follows:
December 31, 2015 2014
(Dollars in thousands)
Federal income taxes receivable .............................................. $ 66,785 $ 108,820
Net state income taxes receivable ............................................. 3,309 4,391
Income tax expense (benefit) is summarized as follows:
Year Ended December 31, 2015 2014 2013
(Dollars in thousands)
Current
Federal ................................................... $ 92,887 $ (87,736) $ 181,579
State .................................................... 8,256 11,091 11,614
Deferred
Federal ................................................... 60,939 41,851 (65,970)
Federal – valuation allowance adjustment ............................. –(10,816) –
State .................................................... 9,910 2,208 (1,180)
State – valuation allowance adjustment ............................... –38,470 –
$ 171,992 $ (4,932) $ 126,043
A reconciliation of TDS’ income tax expense computed at the statutory rate to the reported income tax expense, and the
statutory federal income tax expense rate to TDS’ effective income tax expense rate is as follows:
2015 2014 2013
Year Ended December 31, Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
Statutory federal income tax expense and rate ..... $ 152,111 35.0% $ (53,278) 35.0% $ 102,502 35.0%
State income taxes, net of federal benefit1........ 11,002 2.5 42,834 (28.1) 10,548 3.6
Effect of noncontrolling interests .............. 2,791 0.6 (5,777) 3.8 (1,034) (0.4)
Gains (losses) on investments and sale of assets2... –– – – 14,949 5.1
Change in federal valuation allowance3.......... 2,022 0.5 (8,697) 5.7 – –
Goodwill impairment4..................... ––18,260 (12.0) – –
Other differences, net ..................... 4,066 1.0 1,726 (1.2) (922) (0.3)
Total income tax expense (benefit) and rate ....... $ 171,992 39.6% $ (4,932) 3.2% $ 126,043 43.0%
1State income taxes, net of federal benefit, include changes in unrecognized tax benefits as well as adjustments to the valuation allowance. During the
third quarter of 2014 TDS recorded a $38.5 million increase to income tax expense related to a valuation allowance recorded against certain state
deferred tax assets.
2Gains (losses) on investments and sale of assets represents 2013 tax expense related to the NY1 & NY2 Deconsolidation and the Divestiture
Transaction. See Note 6 — Acquisitions, Divestitures and Exchanges and Note 8 — Investments in Unconsolidated Entities for additional information.
3Change in federal valuation allowance in 2015 relates primarily to losses incurred by certain entities where realization of deferred tax assets is not ‘‘more
likely than not.’’ The decrease to income tax expense in 2014 was due to a valuation allowance reduction for federal net operating losses previously
limited under loss utilization rules.
4Goodwill impairment reflects an adjustment to increase income tax expense by $18.3 million related to a portion of the goodwill impairment of Suttle-
Straus and the HMS reporting unit recorded in 2014 which is nondeductible for income tax purposes. See Note 7 — Intangible Assets for additional
information related to the goodwill impairment.
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TELEPHONE AND DATA SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS