Income Taxes

The U.S. federal statutory tax rates for the three-month periods ended June 30, 2018 and 2017 were 21% and 35%, respectively. The Tax Cuts and Jobs Act (the Tax Act) enacted in December 2017 reduced the corporate income tax rate effective January 1, 2018. The differences that caused our effective income tax rates to differ from the U.S. federal statutory rates for the three-month periods ended June 30, 2018 and 2017, respectively, were as follows:



	Three Months Ended June 30,
	2018			2017
	(in millions)
Income tax expense at the federal statutory rate	$	(46	)	$	(174	)
Effect of:
State income taxes, net of federal income tax effect	(15		)	(22		)
State law changes, net of federal income tax effect	24			3
Increase deferred tax liability for organizational restructuring	(13		)	—
Increase deferred tax liability for business activity changes	—			(65		)
Credit for increasing research activities	—			4
Change in federal and state valuation allowance	6			(33		)
Other, net	(3		)	(5		)
Income tax expense	$	(47	)	$	(292	)
Effective income tax rate	21.4		%	58.6		%

Income tax expense of $47 million for the three-month period ended June 30, 2018 represented a consolidated effective tax rate of approximately 21%. During the period, we recognized a $24 million tax benefit for the impact of state law changes enacted during the period, partially offset by a $13 million tax expense attributable to organizational restructuring. These adjustments were primarily driven by the change in carrying value of our deferred tax assets and liabilities on temporary differences.

Income tax expense of $292 million for the three-month period ended June 30, 2017 represented a consolidated effective tax rate of approximately 59%. Income tax expense was primarily attributable to taxable temporary differences from the tax amortization of FCC licenses and tax expense on pre-tax gains from spectrum license exchanges during the period. We also increased our deferred state income tax liability by $65 million for changes in business activities causing us to become subject to income tax in additional tax jurisdictions. This resulted in a change in the measurement of the carrying value of our deferred tax liability on temporary differences, primarily FCC licenses.

We continue to maintain a valuation allowance on certain deferred tax assets, primarily net operating losses with definite-life carry forward periods. Factors that could change our judgment as to our ability to realize these deferred tax assets, and therefore, reduce our valuation allowance, include the existence of future taxable income generated by temporary differences reversing in the net operating loss carryforward periods and income from continuing operations.

On December 22, 2017 the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which addresses income tax accounting implications of the Tax Act. Estimates were used to determine the balance of deferred tax assets and liabilities subject to changes in tax laws included in the Tax Act, as well as the reversal pattern of such deferred tax assets and liabilities in assessing the ability to realize deferred tax assets. We continue to analyze the effects of the Tax Act and will record any additional impacts as they are identified during the measurement period. During the three-month period ended June 30, 2018, we did not identify or record any adjustments to the provisional amount previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2018.

As of June 30, 2018 and March 31, 2018, we maintained unrecognized tax benefits of $226 million and $239 million, respectively. Cash paid for income taxes, net was $39 million and $32 million for the three-month periods ended June 30, 2018 and 2017, respectively.