
Note 11.	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:



	Successor						Predecessor
	Three Months Ended June 30,						Three Months Ended June 30,
	2014			2013			2013
	(in millions)
Income tax (expense) benefit at the federal statutory rate	$	(3	)	$	61		$	539
Effect of:
State income taxes, net of federal income tax effect	(7		)	7			47
Change in valuation allowance	27			—			(621		)
Acquisition-related costs	—			(7		)	(8		)
Other, net	(2		)	—			(12		)
Income tax benefit (expense)	$	15		$	61		$	(55	)
Effective income tax rate	(187.5		)%	35.0		%	(3.6		)%

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 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 recorded a decrease in its valuation allowance resulting in the recognition of an income tax benefit of $27 million during the Successor three-month period ended June 30, 2014. This net decrease in the valuation allowance resulted from a decrease of $73 million related to the planned disposition of certain FCC licenses, offset by a $46 million increase in the valuation allowance primarily attributable to the net increase in deferred tax assets related to the federal and state net operating loss carryforwards generated during the period. The planned disposition of the FCC licenses results in the ability to schedule the related temporary difference future income during the net operating loss carryforward period when evaluating the ability to realize our deferred tax assets. The Company recognized income tax expense to increase the valuation allowance by $621 million during the Predecessor three-month period ended June 30, 2013 on deferred tax assets primarily related to losses incurred during the period. 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 benefit of $15 million for the Successor three-month period ended June 30, 2014 is primarily attributable to the $73 million decrease in valuation allowance attributable to the planned disposition of certain FCC licenses, offset by taxable temporary differences from tax amortization of FCC licenses during the period. Income tax expense of $55 million for the Predecessor three-month period ended June 30, 2013 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. These temporary differences result in net deferred income tax expense since they cannot be scheduled to reverse during the loss carryforward period.

As of June 30, 2014 and March 31, 2014, we maintained a liability related to unrecognized tax benefits of $160 million. Cash paid for income taxes, net was $28 million for the Successor three-month period ended June 30, 2014 and insignificant for the Successor and Predecessor three-month periods ended June 30, 2013.