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Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Our deferred tax assets primarily represent NOL carry
- forwards associated with Clearwire's operations prior to the formation of the Company on
November 28, 2008 and the portion of the partnership losses allocated to Clearwire after the formation of the Company. The Company is subject to a
change in control test under Section 382 of the Internal Revenue Code, that if met, would limit the annual utilization of any pre
- change in control NOL
carryforward as well as the ability to use certain unrealized built in losses as future tax deductions. We believe that the Comcast Exchange, which
occurred on September 27, 2012, when combined with other issuances of our Class A Common Stock and certain third party investor transactions
involving our Class A Common Stock since December 13, 2011, resulted in a change in control under Section 382 of the Internal Revenue Code. As a
result of this change in control and the change in control that occurred on December 13, 2011, we believe that we permanently will be unable to use a
significant portion of our NOL carry
- forwards and credit carry - forwards, which are collectively referred to as tax attributes, that arose before the
change in control to offset future taxable income. As a result of the annual limitations under Sections 382 and 383 of the Internal Revenue Code on the
utilization of tax attributes following an ownership change, it was determined that approximately
$2.11 billion of United States NOL carry - forwards will
expire unutilized. The United States tax attributes are presented net of these limitations. In addition, subsequent changes of ownership for purposes of
Sections 382 and 383 of the Internal Revenue Code could further diminish our use of remaining United States tax attributes.
We have recognized a deferred tax liability for the difference between the financial statement carrying value and the tax basis of the partnership
interest. As it relates to the United States tax jurisdiction, we determined that our temporary taxable difference associated with our investment in the
partnership will not completely reverse within the carry
- forward period of the NOLs. The portion of such temporary difference that will reverse within
the carry - forward period of the NOLs represents relevant future taxable income. Management has reviewed the facts and circumstances, including the
history of NOLs, projected future tax losses, and determined that it is appropriate to record a valuation allowance against the portion of our deferred
tax assets that are not deemed realizable. As a result of the Time Warner Exchange, the Comcast Exchange and the Bright House Exchange, there was
an increase in the amount of temporary difference which will reverse within the NOL carry
- forward period. Therefore, management determined that it
was appropriate to reduce the valuation allowance recorded against our deferred tax assets, along with recording a corresponding deferred tax benefit
for our continuing operations. The income tax benefit reflected in our condensed consolidated statements of operations for continuing operations
primarily reflects United States deferred taxes net of certain state taxes.
We file income tax returns for Clearwire and our subsidiaries in the United States federal jurisdiction and various state and foreign jurisdictions.
As of December 31, 2012, the tax returns for Clearwire for the years 2003 through 2011 remain open to examination by the Internal Revenue Service and
various state tax authorities.
During 2012, we completed the sale of our operations in Spain, Germany and Belgium (See Note 18, Discontinued Operations, for further
information). As a result, certain intercompany loans related to our international operations are considered uncollectible for United States federal
income tax purposes and, as a result, there was an increase to our deferred tax liability of approximately
$167.2 million along with a corresponding
deferred tax expense for our discontinued operations. The increase to deferred tax assets as a result of the additional tax losses was fully offset by a
corresponding increase to the valuation allowance recorded against our deferred tax assets.
Our policy is to recognize any interest related to unrecognized tax benefits in interest expense or interest income. We recognize penalties as
additional income tax expense. As of December 31, 2012, we had no material uncertain tax positions and therefore accrued no interest or penalties
related to uncertain tax positions.
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