Sprint - Nextel 2011 Annual Report Download - page 93

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In addition, during 2011, a $59 million expense was recorded as a result of the effect of changes in corporate state income tax laws. Of the $59 million, $38 million was
recognized within "State income taxes, net of federal income tax effect" and $21 million was recognized as "Change in valuation allowance" in the table above.
During 2011, 2010 and 2009, we incurred $194 million, $210 million, and $(3) million, respectively, of foreign income (loss), which is included in loss before
income taxes. We have no material unremitted earnings of foreign subsidiaries. Cash was paid for income taxes, net, of $35 million and $31 million in 2011 and 2009,
respectively. Cash refunds for income taxes were received, net, of $139 million in 2010.
In 1998, we acquired $229 million of potential tax benefits related to net operating loss carryforwards in the controlling interest acquisition of our wireless
j
oint venture, which we call the PCS Restructuring. The benefits acquired in the PCS Restructuring are subject to certain realization restrictions under various tax laws.
We are required to reimburse the former cable company partners of the joint venture for net operating loss and tax credit carryforward benefits generated before the PCS
Restructuring if realization by us produces a cash benefit that would not otherwise have been realized. The reimbursement will equal 60% of the net cash benefit received
by us and will be made to the former cable company partners in shares of our stock. As of December 31, 2011, the unexpired carryforward benefits subject to this
requirement total $59 million and we maintained a valuation allowance on the entire amount of these tax benefits.
As of December 31, 2011, we had federal operating loss carryforwards of $9.5 billion and state operating loss carryforwards of $14.4 billion. Related to these
loss carryforwards, we have recorded federal tax benefits of $3.2 billion and net state tax benefits of $650 million before consideration of the valuation allowances.
Approximately $545 million of the federal net operating loss carryforwards expire between 2016 and 2019. The remaining $9.0 billion expire in varying amounts between
2020 and 2031. The state operating loss carryforwards expire in varying amounts through 2031.
In addition, we had available, for income tax purposes, federal alternative minimum tax net operating loss carryforwards of $9.7 billion and state alternative
minimum tax net operating loss carryforwards of $2.4 billion. The loss carryforwards expire in varying amounts through 2031. We also had available capital loss
carryforwards of $144 million. Related to these capital loss carryforwards are tax benefits of $52 million. Capital loss carryforwards of $109 million expire in 2013 and
the remaining $35 million expire in 2014 and 2015.
We also had available $471 million of federal and state income tax credit carryforwards as of December 31, 2011. Included in this amount are $23 million of
income tax credits which expire prior to 2015 and $296 million which expire in varying amounts between 2015 and 2031. The remaining $152 million do not expire.
Unrecognized tax benefits are established for uncertain tax positions based upon estimates regarding potential future challenges to those positions at the largest
amount that is greater than fifty percent likely of being realized upon ultimate settlement. These estimates are updated at each reporting date based on the facts,
circumstances and information available. Interest related to these unrecognized tax benefits is recognized in interest expense. Penalties are recognized as additional
income tax expense. The total unrecognized tax benefits attributable to uncertain tax positions as of December 31, 2011 and 2010 were $225 million and $228 million,
respectively. At December 31, 2011, the total unrecognized tax benefits included items that would favorably affect the income tax provision by $187 million, if
recognized without an offsetting valuation allowance adjustment. As of December 31, 2011 and 2010, the accrued liability for income tax related interest and penalties
was $26 million and $28 million, respectively.
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