Sprint - Nextel 2012 Annual Report Download - page 150

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
resolution of various federal and state income tax uncertainties. During 2011, a
$59 million expense was recorded as a result of the effect of changes in
corporate state income tax laws.
During
2012, 2011 and 2010 , we generated $319 million , $194 million , and $210 million , respectively, of foreign income, 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
$28 million and $35
million in 2012 and 2011, respectively. Cash refunds for income taxes were received, net, of $139 million in 2010.
As of
December 31, 2012 , we had federal operating loss carryforwards of $10.8 billion and state operating loss carryforwards of $14.9 billion .
Related to these loss carryforwards, we have recorded federal tax benefits of $3.7 billion and net state tax benefits of $709 million before consideration
of the valuation allowances. Approximately
$971 million of the federal net operating loss carryforwards expire between 2016 and 2020. The remaining
$9.8 billion expire in varying amounts between 2021 and 2032. The state operating loss carryforwards expire in varying amounts through 2032.
In addition, we had available, for income tax purposes, federal alternative minimum tax net operating loss carryforwards of
$11.2 billion and
state alternative minimum tax net operating loss carryforwards of
$3.0 billion . The loss carryforwards expire in varying amounts through 2032. We also
had available capital loss carryforwards of
$342 million . Related to these capital loss carryforwards are tax benefits of $126 million . Capital loss
carryforwards of
$112 million expire in 2013 and the remaining $230 million expires between 2014 and 2017.
We also had available
$431 million of federal and state income tax credit carryforwards as of December 31, 2012 . Included in this amount are
$7 million of income tax credits which expire prior to 2016 and $294 million which expire in varying amounts between 2016 and 2032. The remaining $130
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, 2012 and 2011 were $171 million and $225 million , respectively. At December 31, 2012 , the total unrecognized tax benefits included items
that would favorably affect the income tax provision by $151 million , if recognized without an offsetting valuation allowance adjustment. As of
December 31, 2012 and 2011 , the accrued liability for income tax related interest and penalties was $5 million and $26 million , respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
We file income tax returns in the U.S. federal jurisdiction and each state jurisdiction which imposes an income tax. We also file income tax
returns in a number of foreign jurisdictions. However, our foreign income tax activity has been immaterial.
The Internal Revenue Service (IRS) has completed the examination of our 2007, 2008 and 2009 consolidated income tax returns. Settlement
agreements were reached with the Appeals or Exam division of the IRS for examination issues in dispute for years prior to 2010. The issues were
immaterial to our consolidated financial statements.
F - 29
2012
2011
(in millions)
Balance at January 1
$
225
$
228
Additions based on current year tax positions
1
4
Additions based on prior year tax positions
1
4
Reductions for prior year tax positions
(1
)
(1
)
Reductions for settlements
(52
)
(2
)
Reductions for lapse of statute of limitations
(3
)
(8
)
Balance at December 31
$
171
$
225