Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.3.1.900
Income Taxes
12 Months Ended
Dec. 31, 2015
Income Taxes  
Income Taxes

(9) Income Taxes

Liberty Broadband, as consolidated, was included in the federal consolidated income tax return of Liberty through November 4, 2014. Subsequent to the Broadband Spin-Off, Liberty Broadband files separate federal consolidated income tax returns. The tax provision included in these financial statements has been prepared on a stand-alone basis, as if Liberty Broadband was not part of the consolidated Liberty group for the periods prior to the Broadband Spin-Off. Charter and Time Warner Cable are not included in the Liberty Broadband consolidated group tax return as Liberty Broadband owns less than 80% of both companies. A portion of the income taxes allocated to Liberty Broadband by Liberty were treated as an equity contribution by Liberty upon completion of the Broadband Spin-Off.

Income tax benefit (expense) consists of:

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

2015

 

2014

 

2013

 

 

 

amounts in thousands

 

Current:

    

 

 

    

 

    

 

 

Federal

 

$

(4,234)

 

510

 

(5,124)

 

State and local

 

 

(862)

 

473

 

(3,102)

 

 

 

 

(5,096)

 

983

 

(8,226)

 

Deferred:

 

 

 

 

 

 

 

 

Federal

 

 

23,512

 

62,014

 

26,735

 

State and local

 

 

1,452

 

4,689

 

4,189

 

 

 

 

24,964

 

66,703

 

30,924

 

Income tax benefit (expense)

 

$

19,868

 

67,686

 

22,698

 

 

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,

 

 

 

2015

 

2014

 

2013

 

 

 

amounts in thousands

 

Computed expected tax benefit (expense)

    

$

24,519

    

70,802

    

22,549

 

State and local taxes, net of federal income taxes

 

 

1,786

 

2,657

 

2,462

 

Foreign taxes, net of foreign tax credit

 

 

(59)

 

 —

 

(751)

 

Change in valuation allowance

 

 

612

 

(2,154)

 

(986)

 

Dividends received deduction

 

 

752

 

819

 

1,506

 

Change in tax rate

 

 

(179)

 

(998)

 

(1,756)

 

Impairment of intangible assets not deductible for tax purposes

 

 

(7,234)

 

(6,452)

 

 —

 

Loss on liquidation of subsidiary

 

 

 —

 

3,082

 

 

Other

 

 

(329)

 

(70)

 

(326)

 

Income tax (expense) benefit

 

$

19,868

 

67,686

 

22,698

 

 

For the year ended December 31, 2015, the significant reconciling items, as noted in the table above, are the result of the impairment to non-deductible goodwill related to TruePosition.

For the year ended December 31, 2014 the significant reconciling items, as noted in the table above, are the result of the impairment to non-deductible goodwill at Skyhook and a tax loss from the liquidation of a consolidated subsidiary at TruePosition.

During 2013, Liberty Broadband changed its estimate of the effective tax rate used to measure its net deferred tax liabilities, based on expected changes to the Company’s state apportionment factors due to the Company’s investment in Charter Communications. The rate change required an adjustment to deferred taxes at the parent level.

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,

 

 

 

2015

 

2014

 

 

 

amounts in thousands

 

Deferred tax assets:

    

 

    

    

    

 

Net operating loss carryforwards

 

$

12,585

 

20,201

 

Investments

 

 

45,195

 

 —

 

Accrued stock-based compensation

 

 

2,896

 

943

 

Deferred revenue

 

 

1,880

 

16,490

 

Other

 

 

2,254

 

6,759

 

Total deferred tax assets

 

 

64,810

 

44,393

 

Less: valuation allowance

 

 

(7,628)

 

(8,240)

 

Net deferred tax assets

 

 

57,182

 

36,153

 

Deferred tax liabilities:

 

 

 

 

 

 

Investments

 

 

 —

 

(1,252)

 

Intangible assets

 

 

(1,795)

 

(4,039)

 

Other

 

 

(19)

 

(40)

 

Total deferred tax liabilities

 

 

(1,814)

 

(5,331)

 

Net deferred tax asset (liability)

 

$

55,368

 

30,822

 

 

The Company’s valuation allowance decreased $612 thousand in 2015, which affected tax expense during the year ended December 31, 2015.

At December 31, 2015, Liberty Broadband had federal and state net operating losses (on a tax effected basis) and tax credit carryforwards for income tax purposes aggregating approximately $12.6 million. These net operating losses and credit carryforwards are expected to be utilized prior to expiration, except for $7.6 million which based on current projections, may expire unused.  The carryforwards that are expected to be utilized will begin to expire in 2022.

As of December 31, 2015, the Company had not recorded tax reserves related to unrecognized tax benefits for uncertain tax positions.

As of December 31, 2015, Liberty’s tax years prior to 2012 are closed for federal income tax purposes, and the IRS has completed its examination of Liberty’s 2012 through 2014 tax years. The tax loss carryforwards from the 2011 through 2014 tax years are still subject to adjustment. Liberty Broadband’s 2015 tax year is being examined as part of the IRS’s Compliance Assurance Process “CAP” program. As discussed earlier, because Liberty Broadband’s ownership of Charter Communications and Time Warner Cable is less than the required 80%, these companies are not consolidated with Liberty Broadband for federal income tax purposes.