(7) Income Taxes

On December 22, 2017, the U.S. government enacted the Tax Act. The Tax Act made broad and complex changes to the U.S. tax code, the most significant of which was a reduction to the U.S. federal corporate tax rate from 35 percent to 21 percent. The Company reflected the income tax effects of the Tax Act for which the accounting was known as of December 31, 2017.  As of December 31, 2018, the Company had completed its analysis of the tax effects of the Tax Act.

Income tax benefit (expense) consists of:

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Income tax benefit (expense) differs from the amounts computed by applying the applicable U.S. federal income tax rate of 21%in 2019 and 2018 and 35% in 2017 as a result of the following:

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For the year ended December 31, 2019, the significant reconciling item, as noted in the table above, is the result of state income taxes.

For the year ended December 31, 2018, the significant reconciling items, as noted in the table above, are the result of state income taxes, partially offset by unrealized gains attributable to the Company’s own stock which is not recognized for tax purposes.

For the year ended December 31, 2017, the significant reconciling items, as noted in the table above, are the result of the effect of the change in the U.S. federal corporate tax rate from 35% to 21% on deferred taxes and the effect of state income taxes. The Company recorded a discrete net tax benefit of $516 million in the period ending December 31, 2017. This net benefit primarily consisted of a net benefit for the corporate rate reduction.

The tax effects of temporary differences and tax attributes that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:

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The Company’s valuation allowance increased $0.2 million in 2019, which affected tax expense during the year ended December 31, 2019.

At December 31, 2019, the Company had a deferred tax liability on investments of $1,067.5 million due to its share of earnings in its equity investment in Charter.

At December 31, 2019, Liberty Broadband had federal and state net operating losses, capital loss carryforwards, interest expense carryforwards and tax credit carryforwards for income tax purposes aggregating $66.3 million (on a tax effected basis). Of the $66.3 million, $17.1 million are carryforwards with no expiration. The remaining carryforwards expire at certain future dates. These carryforwards are expected to be utilized prior to expiration, except for $8.0 million which based on current projections, may expire unused and accordingly are subject to a valuation allowance.  The carryforwards that are expected to be utilized will begin to expire in 2020.

As of December 31, 2019, the Company had not recorded tax reserves related to unrecognized tax benefits for uncertain tax positions.

As of December 31, 2019, the IRS has completed its examination of Liberty Broadband’s 2016, 2017 and 2018 tax years.  Liberty Broadband’s 2019 tax year is being examined as part of the IRS’s Compliance Assurance Process “CAP” program. Because Liberty Broadband’s ownership of Charter is less than the required 80%, Charter is not consolidated with Liberty Broadband for federal income tax purposes.