Charter 2012 Annual Report Download - page 103

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012, 2011 AND 2010
(dollars in millions, except share or per share data or where indicated)
F- 28
transaction were recorded in the financial statements as a $168 million reduction of additional paid-in capital and a $69 million
reduction of income tax expense for the year ended December 31, 2010.
For the years ended December 31, 2012, 2011, and 2010, the Company recorded deferred income tax expense and benefits as
shown below. The income tax expense is recognized primarily through increases in deferred tax liabilities related to our investment
in Charter Holdco, as well as through current federal and state income tax expense and increases in the deferred tax liabilities of
certain of our indirect corporate subsidiaries. The income tax benefits were realized through reductions in the deferred tax liabilities
related to Charter’s investment in Charter Holdco, as well as the deferred tax liabilities of certain of Charter’s indirect corporate
subsidiaries. The tax provision in future periods will vary based on current and future temporary differences, as well as future
operating results.
Current and deferred income tax expense is as follows:
Year Ended December 31,
2012 2011 2010
Current expense:
Federal income taxes $ — $ — $ —
State income taxes (7) (9)(8)
Current income tax expense (7) (9)(8)
Deferred expense:
Federal income taxes (223) (258)(263)
State income taxes (27) (32)(24)
Deferred income tax expense (250) (290)(287)
Total income tax expense $ (257) $ (299) $ (295)
The Company’s effective tax rate differs from that derived by applying the applicable federal income tax rate of 35% for the
years ended December 31, 2012, 2011, and 2010, respectively, as follows:
Year Ended December 31,
2012 2011 2010
Statutory federal income taxes $ 17 $ 24 $ (20)
Statutory state income taxes, net (7) (9)(8)
Nondeductible expenses (6) (5)(4)
Change in valuation allowance (264) (312)(248)
Changes in provision estimates (1) 1 (23)
Other 4 2 8
Income tax expense $ (257) $ (299) $ (295)
For the years ended December 31, 2012, 2011, and 2010, the change in valuation allowance includes an increase of $4 million,
$3 million, and $22 million, respectively, related to adjustments to cash flow hedges included in other comprehensive income,
and 2010 also includes an increase of $50 million related to Charter’s investment in partnership interest.