Sprint - Nextel 2014 Annual Report Download - page 120

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-37
realizable and expenses recorded during the period that are not currently deductible for income tax purposes. The remaining
increase of $272 million in the carrying amount of the valuation allowance for the Successor year ended March 31, 2015 is
primarily related to amounts recorded to other comprehensive (loss) income related to the pension net actuarial loss and net
impacts of acquisition accounting for the SoftBank Merger and Clearwire Acquisition. The remaining decrease in the
carrying amount of the valuation allowance for the Successor year ended December 31, 2013 is primarily related to the net
impact of acquisition accounting for the SoftBank Merger and Clearwire Acquisition. For the Predecessor year ended
December 31, 2012 the remaining increase in the carrying amount of the valuation allowance is primarily associated with the
tax effect of items reflected in other comprehensive loss and other accounts. We do not expect to record significant tax
benefits on future net operating losses until our circumstances justify the recognition of such benefits.
We believe it is more likely than not that our remaining deferred income tax assets, net of the valuation allowance,
will be realized based on current income tax laws and expectations of future taxable income stemming from the reversal of
existing deferred tax liabilities. Uncertainties surrounding income tax law changes, shifts in 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 benefit of $574 million for the Successor year ended March 31, 2015 is primarily attributable to
recognition of a tax benefit on the $1.9 billion Sprint trade name impairment loss partially offset by tax expense on taxable
temporary differences from the amortization of FCC licenses during the period. Income tax expense of $56 million and $45
million for the Successor three-month transition period ended March 31, 2014, and year ended December 31, 2013,
respectively, and $38 million and $154 million for the Predecessor unaudited three-month period ended March 31, 2013 and
year ended December 31, 2012, 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 the Successor year ended March 31, 2015, three-month transition period ended March 31, 2014 and year
ended December 31, 2013, and Predecessor 191-day period ended July 10, 2013, unaudited three-month period ended March
31, 2013, and year ended December 31, 2012, we generated $398 million, $110 million, $263 million, $238 million, $96
million, and $319 million, respectively, of foreign income, which is included in (loss) income before income taxes on the
consolidated statements of operations. We have no material unremitted earnings of foreign subsidiaries.
As of March 31, 2015, we had federal operating loss carryforwards of $19.9 billion, state operating loss
carryforwards of $20.6 billion and foreign net operating loss carryforwards of $797 million. Related to these loss
carryforwards, we have recorded federal tax benefits of $7.0 billion, net state tax benefits of $951 million and foreign tax
benefits of $266 million before consideration of the valuation allowances. Approximately $1.4 billion of the federal net
operating loss carryforwards expire between 2017 and 2021. The remaining $18.5 billion expire in varying amounts between
2022 and 2035. The state operating loss carryforwards expire in varying amounts through 2035. Foreign operating loss
carryforwards of $426 million do not expire. The remaining foreign operating loss carryforwards expire in varying amounts
starting in 2016.
In addition, we had available, for income tax purposes, federal alternative minimum tax net operating loss
carryforwards of $20.9 billion and state alternative minimum tax net operating loss carryforwards of $4.9 billion. The loss
carryforwards expire in varying amounts through 2035. We also had available capital loss carryforwards of $220 million.
Related to these capital loss carryforwards are tax benefits of $84 million. The capital loss carryforwards expire between
2016 and 2019.
We also had available $451 million of federal and state income tax credit carryforwards as of March 31, 2015.
Included in this amount are $3 million of income tax credits which expire prior to 2017 and $320 million which expire in
varying amounts between 2017 and 2035. The remaining $128 million do not expire.