Charter 2009 Annual Report Download - page 30

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27
Charter’ s ability to use its net operating losses, in conjunction with the net operating loss expiration provisions,
could reduce its ability to use a portion of Charter’ s net operating losses to offset future taxable income which could
result in Charter being required to make material cash tax payments. Charter’ s ability to make such income tax
payments, if any, will depend at such time on its liquidity or its ability to raise additional capital, and/or on receipt of
payments or distributions from Charter Holdco and its subsidiaries, including us.
As of December 31, 2009 and 2008, CCH II has recorded net deferred income tax liabilities of $213 million and
$179 million, respectively. As part of our net liability, on December 31, 2009 and 2008, we had deferred tax assets
of $121 million and $99 million, respectively, which primarily relate to financial and tax losses generated by our
indirect corporate subsidiaries. In assessing the realizability of deferred tax assets, management considers whether it
is more likely than not that some portion or all of the deferred tax assets will be realized. Due to our history of
losses, we were unable to assume future taxable income in our analysis and accordingly valuation allowances have
been established except for deferred benefits available to offset certain deferred tax liabilities that will reverse over
time. Accordingly, our deferred tax assets have been offset with a corresponding valuation allowance of $31 million
and $60 million at December 31, 2009 and 2008, respectively.
No tax years for Charter or Charter Holdco, our indirect parent companies, are currently under examination by the
Internal Revenue Service. Tax years ending 2006 through 2009 remain subject to examination and assessment.
Years prior to 2006 remain open solely for purposes of examination of Charter’ s net operating loss and credit
carryforwards.
Litigation
Legal contingencies have a high degree of uncertainty. When a loss from a contingency becomes estimable and
probable, a reserve is established. The reserve reflects management's best estimate of the probable cost of ultimate
resolution of the matter and is revised as facts and circumstances change. A reserve is released when a matter is
ultimately brought to closure or the statute of limitations lapses. We have established reserves for certain matters. If
any of these matters are resolved unfavorably, resulting in payment obligations in excess of management's best
estimate of the outcome, such resolution could have a material adverse effect on our consolidated financial
condition, results of operations, or our liquidity.