
Note 10.	Income Taxes

The differences that caused our effective income tax rates to vary from the 35% U.S. federal statutory rate for income taxes were as follows:



	Nine Months Ended
	September 30,
	2012			2011
	(in millions)
Income tax benefit at the federal statutory rate	$	1,013		$	504
Effect of:
State income taxes, net of federal income tax effect	104			(7		)
Change in valuation allowance	(1,210		)	(654		)
Other, net	(17		)	9
Income tax expense	$	(110	)	$	(148	)
Effective income tax rate	(3.8		)%	(10.3		)%

The realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income sufficient to realize the tax deductions, carryforwards and credits. However, our history of consecutive annual losses reduces our ability to rely on expectations of future income in evaluating the ability to realize our deferred tax assets. Valuation allowances on deferred tax assets are recognized if it is determined that it is more likely than not that the asset will not be realized. As a result, the Company recognized an increase in the valuation allowance of $1.2 billion and $654 million for the nine-month periods ended September 30, 2012 and 2011, respectively, on deferred tax assets primarily related to federal and state net operating loss carryforwards generated during the periods. The valuation allowance was $5.1 billion and $3.9 billion as of September 30, 2012 and December 31, 2011, respectively. We do not expect to record significant tax benefits on future net operating losses until our circumstances justify the recognition of such benefits.

Income tax expense of $110 million and $148 million for the nine-month periods ended September 30, 2012 and 2011, respectively, is primarily attributable to taxable temporary differences from amortization of FCC licenses. FCC licenses are amortized over 15 years for income tax purposes but, because these licenses have an indefinite life, they are not amortized for financial statement reporting purposes. This difference results in net deferred income tax expense since the taxable temporary difference cannot be scheduled to reverse during the loss carryforward period. In addition, during the nine-month period ended September 30, 2012, a $33 million tax benefit was recorded as a result of the successful resolution of various state income tax uncertainties. During the nine-month period ended September 30, 2011, a $52 million expense was recorded as a result of changes in corporate state income tax laws.

As of September 30, 2012 and December 31, 2011, we maintained a liability related to unrecognized tax benefits of $211 million and $225 million, respectively. Cash was paid for net income taxes of $26 million and $33 million during the nine-month periods ended September 30, 2012 and 2011, respectively.