Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Taxes [Abstract]  
Income Tax Disclosure [Text Block]
Income Taxes

Income tax benefit (expense) consists of:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
amounts in millions
Current:
 
 
 
 
 
Federal
$
(146
)
 
(253
)
 
(211
)
State and local
(2
)
 
(7
)
 
(8
)
Foreign
(2
)
 
(1
)
 
(5
)
 
(150
)
 
(261
)
 
(224
)
Deferred:
 
 
 
 
 
Federal
(372
)
 
(33
)
 
734

State and local
(78
)
 
(39
)
 
61

Foreign
—

 
—

 
—

 
(450
)
 
(72
)
 
795

Income tax benefit (expense)
$
(600
)
 
(333
)
 
571


Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35% as a result of the following:

 
Years ended December 31,
 
2012
 
2011
 
2010
 
amounts in millions
Computed expected tax benefit (expense)
$
(704
)
 
(408
)
 
(149
)
Disposition of consolidated subsidiaries
—

 
—

 
462

Settlements with taxing authorities
—

 
—

 
211

Taxable liquidation of a consolidated subsidiary
101

 
—

 
—

Dividends received deductions
40

 
9

 
7

State and local income taxes, net of federal income taxes
(57
)
 
(28
)
 
36

Change in valuation allowance affecting tax expense
24

 
(20
)
 
7

Recognition of tax benefits not previously recognized, net
9

 
109

 
—

Other, net
(13
)
 
5

 
(3
)
Income tax benefit (expense)
$
(600
)
 
(333
)
 
571



For the year ended December 31, 2012 the significant reconciling items, as noted in the table above, are the result of a capital loss realized on the taxable liquidation of a consolidated subsidiary. The realized capital loss was approximately $289 million and as a result a $101 million federal tax benefit was recorded that offset federal tax expense from capital gains realized during the year ended December 31, 2012.
The significant reconciling items for the year ended December 31, 2011 and 2010, as noted in the table above, are the result of settlements reached with the IRS regarding some of our tax positions taken on the Company's prior year tax returns. During the fourth quarter of 2011, the Company and the IRS agreed to certain tax treatments of several disputed items on the Company's 2010 tax return. Upon settlement, the Company recorded additional tax benefit through the statement of operations due to the reversal of certain tax reserves ($104 million) and settled net tax liabilities previously recorded for cash consideration of $136 million. During the fourth quarter of 2010, the Company recognized a net federal tax benefit of $211 million due to an agreement reached with the IRS with respect to settlement of certain derivative contracts reported on the Company's 2009 income tax return.

Additionally, in fourth quarter of 2010, the Company recognized a deferred tax benefit of $462 million from the sale of certain consolidated subsidiaries. This position was settled as part of the agreement reached with the IRS during the fourth quarter of 2011.
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:

 
December 31,
 
2012
 
2011
 
amounts in millions
Deferred tax assets:
 
 
 
Net operating and capital loss carryforwards
$
46

 
76

Accrued stock compensation
7

 
41

Other accrued liabilities
42

 
60

Deferred revenue
16

 
18

Other future deductible amounts
9

 
31

Deferred tax assets
120

 
226

Valuation allowance
(6
)
 
(30
)
Net deferred tax assets
114

 
196

Deferred tax liabilities:
 
 
 
Investments
794

 
417

Intangible assets
90

 
100

Other
19

 
27

Deferred tax liabilities
903

 
544

Net deferred tax liabilities
$
789

 
348

The Company's deferred tax assets and liabilities are reported in the accompanying consolidated balance sheets as follows:

 
December 31,
 
2012
 
2011
 
amounts in millions
Current deferred tax liabilities (assets)
$
(13
)
 
(61
)
Long-term deferred tax liabilities (assets)
802

 
409

Net deferred tax liabilities
$
789

 
348

 The Company's net decrease in the valuation allowance was $24 million in 2012. The gross change in valuation allowance that affected tax expense was $24 million.
 At December 31, 2012, the Company had federal net operating loss carryforwards for income tax purposes which, if not utilized to reduce taxable income in future periods, will expire between 2017 and 2027, the majority of which expire in 2017. These net operating loss carryforwards are subject to certain limitations and may not be currently utilized.
A reconciliation of unrecognized tax benefits is as follows:
 
December 31,
 
2012
 
2011
 
amounts in millions
Balance at beginning of year
$
34

 
158

 
Reductions for tax positions of prior years
(5
)
 
(6
)
 
Lapse of statute and settlements
—

 
(118
)
Balance at end of year
$
29

 
34


        As of December 31, 2012, the Company had recorded tax reserves of $29 million related to unrecognized tax benefits for uncertain tax positions. If such tax benefits were to be recognized for financial statement purposes, $23 million would be reflected in the Company's tax expense and affect its effective tax rate. The Company's estimate of its unrecognized tax benefits related to uncertain tax positions requires a high degree of judgment.
        As of December 31, 2012, the Company's 2001 through 2008 tax years are closed for federal income tax purposes, and the IRS has completed its examination of the Company's 2009 through 2011 tax years. The Company's tax loss carryforwards from its 2008 through 2011 tax years are still subject to adjustment. The Company's 2012 tax year is being examined currently as part of the IRS's Compliance Assurance Process ("CAP") program. Various states are currently examining the Company's prior years state income tax returns. The Company does not believe it is reasonably possible that the amount of the Company's gross unrecognized tax benefits will change within the next twelve months.
        As of December 31, 2012, the Company had no accrued interest and penalties recorded related to uncertain tax positions.