Income Taxes and Accounting for Uncertainty in Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes and Accounting for Uncertainty in Income Taxes

Income Taxes and Accounting for Uncertainty in Income Taxes

10.    Income Taxes and Accounting for Uncertainty in Income Taxes

Income Taxes

Beginning in 2024, DISH Network and its domestic subsidiaries join with EchoStar in filing U.S. consolidated federal income tax returns and, in some states, combined or consolidated returns. The income taxes of domestic and foreign subsidiaries not included in the United States tax group are presented in our consolidated financial statements on a separate return basis for each tax paying entity. The federal and state income tax provisions or benefits recorded by DISH Network are generally those that would have been recorded if DISH Network and its domestic subsidiaries had filed returns as a consolidated group independent of EchoStar. Cash is due and paid to EchoStar based on amounts that would be payable based on DISH Network consolidated or combined group filings. During the years ended December 31, 2024, 2023 and 2022, no payments were made to EchoStar for income taxes.

Our income tax policy is to record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported on our Consolidated Balance Sheets, as well as probable operating loss, tax credit and other carryforwards. Deferred tax assets are offset by valuation allowances when we believe it is more likely than not that net deferred tax assets will not be realized. We periodically evaluate our need for a valuation allowance. Determining necessary valuation allowances requires us to make assessments about historical financial information as well as the timing of future events, including the probability of expected future taxable income and available tax planning opportunities.

As of December 31, 2024, we had $395 million net operating loss carryforwards (“NOLs”) for federal income tax purposes and $250 million of NOL carryforwards for state income tax purposes, which are partially offset by a valuation allowance. In addition, there are $164 million of tax benefits related to credit carryforwards which are partially offset by a valuation allowance. Portions of the state NOL and credit carryforwards expired in 2024.

The components of the (benefit from) provision for income taxes were as follows:

	For the Years Ended December 31,
	2024		2023		2022
	(In thousands)
Current (benefit) provision:
Federal	$	(18,835)	$	(29,307)	$	(23,571)
State		21,865		29,254		59,690
Foreign		2,831		3,301		(7,118)
Total current (benefit) provision		5,861		3,248		29,001
Deferred (benefit) provision:
Federal		(34,566)		(293,666)		615,323
State		(74,106)		(152,725)		85,045
Increase (decrease) in valuation allowance		92,421		71,481		2,367
Total deferred (benefit) provision		(16,251)		(374,910)		702,735
Total (benefit) provision	$	(10,390)	$	(371,662)	$	731,736

Our $73 million loss of “Income (loss) before income taxes” on our Consolidated Statements of Operations and Comprehensive Income (Loss) included a loss of $1 million related to our foreign operations.

The following table shows the principal reasons for the difference between the effective income tax rate and the statutory federal tax rate:

	For the Years Ended December 31,
	2024	2023	2022
	% of pre-tax income/(loss)
Statutory rate	21.0	21.0	21.0
State income taxes, net of federal benefit	70.5	5.0	3.1
Rates different than statutory	(3.9)	(0.1)	—
(Increase) decrease in valuation allowance	(126.4)	(4.8)	—
Tax credits	60.4	2.7	(0.5)
Impairments	—	(0.7)	—
Other, net	(7.4)	1.7	—
Total	14.2	24.8	23.6

Deferred taxes arise because of the differences in the book and tax bases of certain assets and liabilities. Significant components of deferred tax assets and liabilities were as follows:

	As of December 31,
	2024		2023
	(In thousands)
Deferred tax assets:
NOL, interest, credit and other carryforwards	$	1,588,431	$	1,054,749
Accrued and prepaid expenses		925,727		866,277
Stock-based compensation		22,720		20,934
Unrealized (gains) losses on available for sale and other investments (1)		—		198,587
Discount on convertible notes and convertible note hedge transaction, net		696		46,636
Deferred revenue		10,076		13,197
Total deferred tax assets		2,547,650		2,200,380
Valuation allowance		(225,342)		(153,453)
Deferred tax asset after valuation allowance		2,322,308		2,046,927
Deferred tax liabilities:
Depreciation		(1,655,277)		(1,554,517)
Unrealized (gains) losses on available for sale and other investments		(9,061)		—
Regulatory authorizations and other intangible amortization		(7,664,074)		(3,869,784)
Bases differences in partnerships and cost method investments (2)		(1,306,386)		(1,179,888)
Total deferred tax liabilities		(10,634,798)		(6,604,189)
Net deferred tax asset (liability)	$	(8,312,490)	$	(4,557,262)

(1) Included in this line item are deferred taxes related to, among other things, changes in the probability weighted fair value of our option to purchase certain of T-Mobile’s 800 MHz spectrum licenses during the year ended December 31, 2023. See Note 5 for further information.

(2) Included in this line item are deferred taxes related to, among other things, our noncontrolling investments in Northstar Spectrum and SNR HoldCo, including deferred taxes created by the tax amortization of the Northstar Licenses and SNR Licenses. See Note 2 for further information.

Accounting for Uncertainty in Income Taxes

In addition to filing federal income tax returns, we and one or more of our subsidiaries file income tax returns in all states that impose an income tax and a small number of foreign jurisdictions where we have immaterial operations. We are subject to United States federal, state and local income tax examinations by tax authorities for the years beginning in 2008 due to the carryover of previously incurred NOLs. We are currently under a federal income tax examination for years 2008 through 2011, 2013 through 2016, and 2018 through 2019.

A reconciliation of the beginning and ending amount of unrecognized tax benefits included in “Long-term deferred revenue and other long-term liabilities” on our Consolidated Balance Sheets was as follows:

	For the Years Ended December 31,
Unrecognized tax benefit	2024		2023		2022
	(In thousands)
Balance, beginning of period	$	436,128	$	431,640	$	388,837
Additions based on tax positions related to the current year		242,054		3,601		35,180
Additions based on tax positions related to prior years		23,401		9,292		14,723
Reductions based on tax positions related to prior years		(23,177)		(7,219)		(7,100)
Reductions based on tax positions related to settlements with taxing authorities		—		(834)		—
Reductions based on tax positions related to the lapse of the statute of limitations		(310)		(352)		—
Balance, end of period	$	678,096	$	436,128	$	431,640

We have $631 million in unrecognized tax benefits that, if recognized, could favorably affect our effective tax rate. We do not expect any material portion of this amount to be paid or settled within the next 12 months. Accrued interest and penalties on uncertain tax positions are recorded as a component of “Interest expense, net of amounts capitalized” and “Other, net,” respectively, on our Consolidated Statements of Operations and Comprehensive Income (Loss). During the years ended December 31, 2024, 2023 and 2022, we recorded $52 million, $39 million and $22 million in net interest and penalty expense to earnings, respectively. Accrued interest and penalties were $216 million and $164 million at December 31, 2024 and 2023, respectively. The above table excludes these amounts.