Sprint - Nextel 2015 Annual Report Download - page 123

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
We also had available $459 million of federal and state income tax credit carryforwards as of March 31, 2016 . Included in this amount are $3 million of
income tax credits which expire prior to fiscal year 2017 and $354 million which expire in varying amounts between fiscal years 2017 and 2035. The remaining
$102 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 unrecognized tax benefits attributable to uncertain tax positions were $166 million and $163 million , as of the March 31, 2016
and 2015 , respectively. As of March 31, 2016 , the unrecognized tax benefits included items that would favorably affect the income tax provision by $155 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 was as follows:
Years Ended
March 31,
2016
2015
(in millions)
Balance at beginning of period $ 163
$ 160
Additions based on current year tax positions —
5
Additions based on prior year tax positions 5
3
Reductions for prior year tax positions —
(3)
Reductions for settlements —
(1)
Reductions for lapse of statute of limitations (2)
(1)
Balance at end of period $ 166
$ 163
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, 2016 , 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.
Note 13. Commitments and Contingencies
Litigation, Claims and Assessments
In March 2009, a stockholder brought suit, Bennettv.SprintNextelCorp., in the U.S. District Court for the District of Kansas, alleging that Sprint
Communications and three of its former officers violated Section 10(b) of the Exchange Act and Rule 10b-5 by failing adequately to disclose certain alleged
operational difficulties subsequent to the Sprint-Nextel merger, and by purportedly issuing false and misleading statements regarding the write-down of goodwill.
The district court granted final approval of a settlement in August 2015, which did not have a material impact to our financial statements. Five stockholder
derivative suits related to this 2009 stockholder suit were filed against Sprint Communications and certain of its present and/or former officers and directors. The
first, Murphyv.Forsee, was filed in state court in Kansas on April 8, 2009, was removed to federal court, and was stayed by the court pending resolution of the
motion to dismiss the
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