Windstream 2012 Annual Report Download - page 170

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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F-72
12. Income Taxes, Continued:
The significant components of the net deferred income tax liability (asset) were as follows at December 31:
(Millions) 2012 2011
Property, plant and equipment $ 1,292.7 $ 1,260.2
Goodwill and other intangible assets 1,345.8 1,395.8
Operating loss carryforward (711.6)(805.5)
Postretirement and other employee benefits (168.8)(144.3)
Unrealized holding loss and interest swaps (27.6)(37.0)
Deferred compensation (6.3)(5.6)
Bad debt (40.9)(57.4)
Deferred debt costs (46.8)(67.9)
Restricted stock (11.1)(16.0)
Other, net (64.5)(70.5)
1,560.9 1,451.8
Valuation allowance 85.9 165.9
Deferred income taxes, net $ 1,646.8 $ 1,617.7
Deferred tax assets $ (1,194.3)$ (1,103.3)
Deferred tax liabilities 2,841.1 2,721.0
Deferred income taxes, net $ 1,646.8 $ 1,617.7
At December 31, 2012 and 2011, we had federal net operating loss carryforwards of approximately $1,660.0 million and
$1,925.1 million, respectively, which expire in varying amounts from 2019 through 2031. The loss carryforwards at
December 31, 2012 were primarily losses acquired in conjunction with our mergers with Valor, NuVox, Iowa Telecom and
PAETEC. The 2012 decrease is primarily associated with the amount utilized for the year along with final adjustments to the
federal loss carryover from PAETEC that were recorded with an offset through goodwill. At December 31, 2012 and 2011, we
had state net operating loss carryforwards of approximately $2,116.4 million and $2,670.1 million, respectively, which expire
annually in varying amounts from 2013 through 2031. The loss carryforwards at December 31, 2012 were primarily losses
acquired in conjunction with our mergers with Valor, CTC, D&E, Lexcom, NuVox, Iowa Telecom, Q-Comm and PAETEC. The
2012 decrease is primarily associated with final adjustments to the state loss carryover from PAETEC and were recorded with
an offset through goodwill. Federal and state tax rules limit the deductibility of loss carryforwards in years following an
ownership change. As a result of these limitations or the expected lack of sufficient future taxable income of certain entities, we
believe that it is more likely than not that the benefit from certain federal and state loss carryforwards will not be realized prior
to their expiration. We establish valuation allowances when necessary to reduce deferred tax assets to amounts expected to be
realized. Therefore, as of December 31, 2012 and 2011, we recorded valuation allowances of $85.9 million and $165.9 million,
respectively, related to federal and state loss carryforwards which are expected to expire and not be utilized. The 2012 decrease
in the valuation allowance is primarily associated with final adjustments for the acquisition of federal and state net operating
losses from PAETEC and were recorded with an offset through goodwill. The amount of state tax credit carryforward at
December 31, 2012 and 2011, was approximately $20.4 million and $20.7 million, respectively, which expire in varying
amounts from 2014 through 2027.