Charter 2012 Annual Report Download - page 105

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- 30
capital loss carryforwards and suspended losses, resulting in a gross deferred tax asset (net of federal tax benefit) of approximately
$252 million. State tax net operating and capital loss carryforwards generally expire in the years 2013 through 2032. State
suspended losses can generally be carried forward indefinitely.
Upon emergence from bankruptcy, Charter experienced an “ownership change” as defined in Section 382 of the Code. Therefore,
the use of Charter’s tax loss carryforwards is subject to certain limitations under Section 382. As of December 31, 2012, $3.7
billion of federal tax loss carryforwards are unrestricted and available for Charter’s immediate use, while approximately $3.6
billion of federal tax loss carryforwards are still subject to Section 382 restrictions. Pursuant to these restrictions, an aggregate
of $932 million, in varying amounts from 2013 to 2014, and an additional $226 million annually over each of the next 12 years
of federal tax loss carryforwards, should become unrestricted and available for Charter’s use. Those limitation amounts accumulate
for future use to the extent they are not utilized in a given year. Charter’s state loss carryforwards are also subject to similar, but
varying, restrictions on their future use. Charter’s indirect corporate subsidiaries are also subject to separate Section 382 limitations
on the utilization of their net operating loss carryforwards. If the Company was to experience another “ownership change” in the
future, its ability to use its loss carryforwards could be subject to further limitations.
In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax
positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their
technical merits. There is considerable judgment involved in determining whether positions taken on the tax return are “more
likely than not” of being sustained. A reconciliation of the beginning and ending amount of unrecognized tax benefits included
in other long-term liabilities in the accompanying consolidated balance sheets of the Company is as follows.
Balance at December 31, 2010 $ 224
Additions based on tax positions related to prior year 64
Reductions due to tax positions related to prior year (60)
Balance at December 31, 2011 228
Additions based on tax positions related to prior year 1
Reductions due to tax positions related to prior year (27)
Balance at December 31, 2012 $ 202
The Company's entire reserve for uncertain tax positions includes tax positions for which the ultimate deductibility is highly
certain, but for which there is uncertainty about the character of the deductibility. Included in the balance at December 31, 2012
and 2011, are $26 million of net reductions and $4 million of net additions, respec ively. The change in character of the deduction
would not impact the annual effective tax rate after consideration of the valuation allowance. The deductions for the uncertain
tax positions are included with the loss carryforwards in the deferred tax assets.
The Company anticipates that its existing reserves related to uncertain income tax positions as of December 31, 2012 may
significantly decrease during the twelve-month period ending December 31, 2013; however, various events could cause the
Company’s current expectations to change in the future. These uncertain tax positions, if ever recognized in the financial statements,
would be recorded in the consolidated statement of operations as part of the income tax provision.
No tax years for Charter or Charter Holdco are currently under examination by the Internal Revenue Service. Tax years ending
2009 through 2012 remain subject to examination and assessment. Years prior to 2009 remain open solely for purposes of
examination of Charter’s loss and credit carryforwards.
17. Related Party Transactions
The following sets forth certain transactions in which the Company and the directors, executive officers, and affiliates of the
Company are involved or, in the case of the management arrangements, subsidiaries that are debt issuers that pay certain of their
parent companies for services.
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