Sprint - Nextel 2014 Annual Report Download - page 121

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-38
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 were $163 million
and $160 million, as of the March 31, 2015 and 2014, respectively. As of March 31, 2015, the total unrecognized tax benefits
included items that would favorably affect the income tax provision by $152 million, if recognized without an offsetting
valuation allowance adjustment. The accrued liability for income tax related interest and penalties was insignificant for all
periods presented.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Successor
Year Ended
March 31,
Three Months
Ended
March 31,
2015 2014
(in millions)
Balance at beginning of period $ 160 $ 166
Additions based on current year tax positions 5 —
Additions based on prior year tax positions 3 1
Reductions for prior year tax positions (3) (1)
Reductions for settlements (1) —
Reductions for lapse of statute of limitations (1) (6)
Balance at end of period $ 163 $ 160
Settlement agreements were reached with the Appeals or Exam division of the Internal Revenue Service (IRS) for
examination issues in dispute for years prior to 2010. The issues were immaterial to our consolidated financial statements. As
of March 31, 2015, there are no federal income tax examinations being handled by the IRS Exam division nor are there any
issues being handled by the IRS Appeals division.
We are involved in multiple state income tax examinations related to various years beginning with 1996, which
are in various stages of the examination, administrative review or appellate process. Based on our current knowledge of the
examinations, administrative reviews and appellate processes, we believe it is reasonably possible a number of our uncertain
tax positions may be resolved during the next twelve months which could result in a reduction of up to $20 million in our
unrecognized tax benefits.
The federal and state statutes of limitations for assessment of tax liability generally lapse three and four years,
respectively, after the date the tax returns are filed. However, income tax attributes that are carried forward, such as net
operating loss carryforwards, may be challenged and adjusted by taxing authorities at any time prior to the expiration of the
statute of limitations for the tax year in which they are utilized.