Charter 2013 Annual Report Download - page 112

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)
F- 30
Current and deferred income tax expense is as follows:
Year Ended December 31,
2013 2012 2011
Current expense:
Federal income taxes $ (1) $ — $ —
State income taxes (7) (7)(9)
Current income tax expense (8) (7)(9)
Deferred expense:
Federal income taxes (101) (223)(258)
State income taxes (11) (27)(32)
Deferred income tax expense (112) (250)(290)
Total income tax expense $ (120) $ (257)$ (299)
Income tax expense for the year ended December 31, 2013 decreased compared to the corresponding prior period, primarily as a
result of step-ups in basis of indefinite-lived assets for tax, but not GAAP purposes, including the effects of partnership gains
related to financing transactions and a partnership restructuring, which decreased the Company's net deferred tax liability related
to indefinite-lived assets by $137 million.
Of the $137 million decrease in net deferred tax liability, $101 million of deferred tax benefits correspond to gains recognized by
corporate subsidiaries of Charter, which are partners in Charter Holdco, and resulted primarily from the repayment of Charter
Operating credit facility debt with proceeds from the CCO Holdings notes issued in March 2013, see Note 8. The repayment of
Charter Operating credit facility debt, which is not guaranteed by Charter, with proceeds from the notes, which are guaranteed by
Charter, had the effect of reducing the amount of debt allocable to the non-guarantor corporate subsidiaries of Charter. For
partnership tax purposes, the reduction in the amount of non-guaranteed debt available to allocate to these corporate subsidiaries
caused them to recognize gains due to limited basis in their partnership interests in Charter Holdco. These gains result in a step-
up in the underlying tax basis of Charter Holdco's assets and a corresponding reduction in the deferred tax liabilities for financial
reporting purposes. In addition, on December 31, 2013, Charter restructured one of its tax partnerships which resulted in a $405
million net step-up to primarily intangible assets and a deferred income tax benefit of $36 million due to a shift in step-ups to
indefinite-lived intangibles. The tax provision in future periods will vary based on various factors including changes in the
Company's deferred tax liabilities attributable to indefinite-lived intangibles, as well as future operating results, however the
Company does not anticipate having such a large reduction in tax expense attributable to these items unless it enters into similar
future financing or restructuring transactions. The ultimate impact on the tax provision of such future financing and restructuring
activities, if any, will be dependent on the underlying facts and circumstances at the time.