Sprint - Nextel 2013 Annual Report Download - page 154

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
operations between state taxing jurisdictions and future operating income levels may, however, affect the ultimate realization of all or some of these deferred
income tax assets.
Income tax expense of $45 million , $154 million and $254 million for the Successor year ended December 31, 2013 and Predecessor years ended
December 31, 2012 and 2011 , respectively, is primarily attributable to taxable temporary differences from amortization of FCC licenses. Income tax expense of $1.6
billion for the Predecessor 191 - day period ended July 10, 2013, is primarily attributable to taxable temporary differences from the $2.9 billion gain on the
previously
- held equity interests in Clearwire. The gain on the previously - held equity interests in Clearwire was principally attributable to the increase in the fair
value of FCC licenses held by Clearwire. FCC licenses are amortized over
15 years for income tax purposes but, because these licenses have an indefinite life,
they are not amortized for financial statement reporting purposes. These temporary differences result in net deferred income tax expense since they cannot be
scheduled to reverse during the loss carryforward period. In addition, during the year ended December 31, 2012, a
$69 million tax benefit was recorded as a result
of the successful resolution of various 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 the Successor year ended
December 31, 2013 , and Predecessor 191 - day period ended July 10, 2013 and years ended December 31, 2012 and
2011 , we generated $263 million , $238 million , $319 million , and $194 million , respectively, of foreign income, which is included in loss before income taxes. We
have no material unremitted earnings of foreign subsidiaries. Cash paid or received for income taxes was insignificant during the Successor year ended
December 31, 2013 and Predecessor years ended December 31, 2012 and 2011 , as well as during the Predecessor 191 - day period ended July 10, 2013.
As of
December 31, 2013 , we had federal operating loss carryforwards of $16.6 billion , state operating loss carryforwards of $18.5 billion and foreign
net operating loss carryforwards of
$834 million . Related to these loss carryforwards, we have recorded federal tax benefits of $5.8 billion , net state tax benefits
of
$858 million and foreign tax benefits of $277 million before consideration of the valuation allowances. Approximately $981 million of the federal net operating
loss carryforwards expire between 2016 and 2020. The remaining
$15.6 billion expire in varying amounts between 2021 and 2034. The state operating loss
carryforwards expire in varying amounts through 2034. Foreign operating loss carryforwards of
$460 million do not expire. The remaining foreign operating loss
carryforwards expire in varying amounts starting in 2015.
In addition, we had available, for income tax purposes, federal alternative minimum tax net operating loss carryforwards of
$17.1 billion and state
alternative minimum tax net operating loss carryforwards of
$3.9 billion . The loss carryforwards expire in varying amounts through 2034. We also had available
capital loss carryforwards of
$216 million . Related to these capital loss carryforwards are tax benefits of $82 million . The capital loss carryforwards expire
between 2014 and 2017.
We also had available
$447 million of federal and state income tax credit carryforwards as of December 31, 2013 . Included in this amount are $7 million
of income tax credits which expire prior to 2016 and
$317 million which expire in varying amounts between 2016 and 2034. The remaining $123 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 the Successor year ended
December 31, 2013 and Predecessor 191 - day period ended July 10, 2013 and year ended December 31, 2012 were $166 million , $182 million , and $171 million ,
respectively. At the Successor year ended December 31, 2013 , the total unrecognized tax benefits included items that would favorably affect the income tax
provision by
$153 million , if recognized without an offsetting valuation allowance adjustment. As of the Successor year ended December 31, 2013 and
Predecessor 191
- day period ended July 10, 2013 and year ended December 31, 2012 , the accrued liability for income tax related interest and penalties was $3
million , $7 million , and $5 million , respectively.
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