FairPoint Communications 2013 Annual Report Download - page 91

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89
A reconciliation of the Company's statutory tax rate to its effective tax rate is presented below (in percentages):
Predecessor
Company
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Three Hundred
Forty-One
Days Ended
December 31, 2011
Twenty-Four
Days Ended
January 24, 2011
Statutory federal income tax (benefit) rate (35.0)% (35.0)% (35.0)% 35.0%
State income tax (benefit) expense, net of
federal income tax (benefit) expense (4.8) (4.8) (4.0) 4.3
Post-petition interest ——— 0.4
Goodwill impairment — — 16.2 13.7
Non-taxable debt cancellation income — — (9.3) (12.3)
Restructuring charges — 0.1 0.3 0.3
Other, net 0.6 (0.1) 1.2 (0.2)
Valuation allowance (7.4) 1.4 19.2 (8.9)
Effective income tax (benefit) rate (46.6)% (38.4)% (11.4)% 32.3%
Deferred Income Taxes
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities as of December 31, 2013 and 2012 are presented below (in thousands):
December 31, 2013 December 31, 2012
Deferred tax assets:
Federal and state tax loss carryforwards $ 76,570 $ 75,744
Employee benefits 313,760 347,567
Allowance for doubtful accounts 5,290 7,709
Alternative minimum tax and other state credits 4,925 4,531
Capitalized restructuring costs 3,973 4,672
Accrued professional services 3,838 2,553
Service quality rebate reserve 308 2,449
Other, net 8,938 7,336
Total gross deferred tax assets 417,602 452,561
Deferred tax liabilities:
Property, plant, and equipment 269,908 320,534
Goodwill and other intangible assets 36,121 39,856
Other, net 12,498 10,664
Total gross deferred tax liabilities 318,527 371,054
Net deferred tax assets (liabilities) before valuation allowance 99,075 81,507
Valuation allowance (166,773) (192,492)
Net deferred tax liabilities $ (67,698) $ (110,985)
At December 31, 2013, the Company had gross federal NOL carryforwards of $200.4 million after taking into consideration
the NOL tax attribute reduction of $581.8 million resulting from the Company's discharge of indebtedness upon emergence from
Chapter 11 protection. The Company's remaining federal NOL carryforwards will expire from 2021 to 2033. The Company's
remaining state NOL carryforwards will expire from 2015 to 2033. At December 31, 2013, the Company had a net, after attribute
reduction, state NOL deferred tax asset of $10.2 million. At December 31, 2013, the Company had no alternative minimum tax
credit carryover and had $4.9 million in state credit carryovers. Telecom Group completed an initial public offering on February 8,
2005, which resulted in an "ownership change" within the meaning of the United States federal income tax laws addressing NOL
carryforwards, alternative minimum tax credits and other similar tax attributes. The Merger and the Company's emergence from
Chapter 11 protection also resulted in ownership changes. As a result of these ownership changes, there are specific limitations
on the Company's ability to use its NOL carryforwards and other tax attributes. The Company believes it can use the NOLs even
with these restrictions in place based on its current income projections.