INCOME TAXES

Cablevision

Cablevision files a consolidated federal income tax return with its 80% or more owned subsidiaries.

Income tax expense attributable to Cablevision's continuing operations consists of the following components:



	Years Ended December 31,
	2015		2014			2013
Current expense (benefit):
Federal	$	4,844	$	6,122		$	(144	)
State	15,869		2,788			(3,510		)
	20,713		8,910			(3,654		)
Deferred expense:
Federal	97,927		135,873			69,258
State	35,469		23,906			198
	133,396		159,779			69,456
Tax expense (benefit) relating to uncertain tax positions, including accrued interest	763		(52,921		)	(167		)
Income tax expense	$	154,872	$	115,768		$	65,635

Income tax benefit attributable to discontinued operations for the year ended December 31, 2015 of $8,731 is comprised of current and deferred income tax benefit of $111 and $8,620, respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2014 of $2,206 is comprised of current and deferred income tax expense of $108 and $2,098, respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2013 of $232,807 is comprised of current and deferred income tax expense of $18,120 and $214,687, respectively.



The income tax expense attributable to Cablevision's continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:
	Years Ended December 31,
	2015			2014			2013
Federal tax expense at statutory rate	$	119,931		$	148,803		$	67,536
State income taxes, net of federal benefit	18,874			19,059			3,607
Changes in the valuation allowance	(902		)	(344		)	5,631
Changes in the state rates used to measure deferred taxes, net of federal benefit	(1,006		)	(322		)	(11,228		)
Tax expense (benefit) relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	574			(52,914		)	(124		)
Impact of New York tax reform	16,334			(2,050		)	—
Impact of non-deductible officers' compensation	846			1,532			796
Other non-deductible expenses	3,099			3,697			3,628
Research credit	(2,630		)	(2,634		)	(3,739		)
Other, net	(248		)	941			(472		)
Income tax expense	$	154,872		$	115,768		$	65,635

For Cablevision, the tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2015 and 2014 are as follows:



	December 31,
	2015			2014
Deferred Tax Asset (Liability)
Current
NOLs and tax credit carry forwards	$	76,007		$	144,833
Compensation and benefit plans	80,831			74,220
Allowance for doubtful accounts	2,196			4,557
Merger-related costs	7,332			—
Inventory valuation adjustment	7,135			—
Other liabilities	26,216			4,909
Deferred tax asset	199,717			228,519
Valuation allowance	(2,098		)	(3,496		)
Net deferred tax asset, current	197,619			225,023
Investments	(163,396		)	(159,475		)
Prepaid expenses	(19,627		)	(27,605		)
Deferred tax liability, current	(183,023		)	(187,080		)
Net deferred tax asset, current	14,596			37,943
Noncurrent
NOLs and tax credit carry forwards	36,866			25,427
Compensation and benefit plans	97,005			99,076
Partnership investments	123,529			123,243
Investments	9,798			22,294
Other	9,201			7,345
Deferred tax asset	276,399			277,385
Valuation allowance	(2,816		)	(3,901		)
Net deferred tax asset, noncurrent	273,583			273,484
Fixed assets and intangibles	(978,418		)	(884,120		)
Other	—			(452		)
Deferred tax liability, noncurrent	(978,418		)	(884,572		)
Net deferred tax liability, noncurrent	(704,835		)	(611,088		)
Total net deferred tax liability	$	(690,239	)	$	(573,145	)

At December 31, 2015, Cablevision had consolidated federal net operating loss carry forwards ("NOLs") of $431,405 expiring on various dates from 2024 through 2032. Cablevision has recorded a deferred tax asset related to $17,893 of such NOLs. A deferred tax asset has not been recorded for the remaining NOL of $413,512 as this portion relates to 'windfall' deductions on share-based awards that have not yet been realized. Cablevision uses the 'with-and-without' approach to determine whether an excess tax benefit has been realized. Upon realization, such excess tax benefits will be recorded as an increase to paid-in capital. Cablevision realized excess tax benefit of $5,694, $336 and $1,280 during the years ended December 31, 2015, 2014 and 2013 respectively, resulting in an increase to paid-in capital.

As of December 31, 2015, Cablevision has $43,167 of federal alternative minimum tax credit carry forwards which do not expire.

As of December 31, 2015, Cablevision has $17,448 of research credits, expiring in varying amounts from 2023 through 2035.

Subsequent to the utilization of Cablevision's NOLs and tax credit carry forwards, payments for income taxes are expected to increase significantly.

CSC Holdings

CSC Holdings and its 80% or more owned subsidiaries are included in the consolidated federal income tax returns of Cablevision. The income tax provision for CSC Holdings is determined on a stand-alone basis for all periods presented as if CSC Holdings filed separate consolidated income tax returns.

Income tax expense attributable to continuing operations consists of the following components:



	Years Ended December 31,
	2015		2014			2013
Current expense:
Federal	$	169,459	$	189,609		$	66,800
State	20,209		46,573			21,579
	189,668		236,182			88,379
Deferred expense:
Federal	17,555		35,445			89,832
State	61,370		17,744			10,035
	78,925		53,189			99,867
Tax expense (benefit) relating to uncertain tax positions, including accrued interest	763		(52,921		)	(167		)
Income tax expense	$	269,356	$	236,450		$	188,079

Income tax benefit attributable to discontinued operations for the year ended December 31, 2015 of $8,731 is comprised of current and deferred income tax benefit of $111 and $8,620, respectively. Income tax expense attributable to discontinued operations for the year ended December 31, 2014 of $2,206 is comprised of current income tax expense of $2,479, net of deferred income tax benefit of $273. Income tax expense attributable to discontinued operations for the year ended December 31, 2013 of $240,412 is comprised of current income tax expense of $299,353, net of deferred income tax benefit of $58,941.

In connection with the tax allocation policy between CSC Holdings and Cablevision, CSC Holdings increased the affiliate payable due to Cablevision by $166,370, representing the estimated current income tax liability of CSC Holdings for the year ended December 31, 2015 as determined on a stand-alone basis, and as reduced by excess tax benefit realized of $14,170 and current income tax liabilities that are payable by CSC Holdings of $9,436.

The income tax expense attributable to CSC Holdings' continuing operations differs from the amount derived by applying the statutory federal rate to pretax income principally due to the effect of the following items:



	Years Ended December 31,
	2015			2014			2013
Federal tax expense at statutory rate	$	214,742		$	243,740		$	167,098
State income taxes, net of federal benefit	38,311			42,769			27,177
Changes in the valuation allowance	(902		)	(382		)	(101		)
Changes in the state rates used to measure deferred taxes, net of federal benefit	(581		)	379			(6,484		)
Tax expense (benefit) relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	574			(52,914		)	(124		)
Impact of New York tax reform	16,334			(1,502		)	—
Impact of non-deductible officers' compensation, net	846			1,532			796
Other non-deductible expenses	3,099			3,697			3,628
Research credit	(2,630		)	(2,634		)	(3,739		)
Other, net	(437		)	1,765			(172		)
Income tax expense	$	269,356		$	236,450		$	188,079

For CSC Holdings, the tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 2015 and 2014 are as follows:



	December 31,
	2015			2014
Deferred Tax Asset (Liability)
Current
Compensation and benefit plans	$	80,831		$	74,220
Allowance for doubtful accounts	2,196			4,557
Merger-related costs	7,332			—
Inventory valuation adjustment	7,135			—
Other liabilities	26,216			4,909
Deferred tax asset	123,710			83,686
Valuation allowance	(1,650		)	(1,891		)
Net deferred tax asset, current	122,060			81,795
Investments	(163,396		)	(159,475		)
Prepaid expenses	(19,627		)	(27,605		)
Deferred tax liability, current	(183,023		)	(187,080		)
Net deferred tax liability, current	(60,963		)	(105,285		)
Noncurrent
NOLs and tax credit carry forwards	8,785			11,702
Compensation and benefit plans	97,005			99,076
Partnership investments	123,529			123,243
Investments	9,798			22,294
Other	9,201			7,345
Deferred tax asset	248,318			263,660
Valuation allowance	(3,212		)	(5,454		)
Net deferred tax asset, noncurrent	245,106			258,206

Fixed assets and intangibles	(978,418		)	(884,120		)
Other	—			(453		)
Deferred tax liability, noncurrent	(978,418		)	(884,573		)
Net deferred tax liability, noncurrent	(733,312		)	(626,367		)
Total net deferred tax liability	$	(794,275	)	$	(731,652	)

CSC Holdings uses the 'with-and-without' approach to determine whether an excess tax benefit has been realized with regard to 'windfall' deductions on share-based payment awards. Upon realization, the excess tax benefits are recorded as an increase to member's equity. On a stand-alone basis, CSC Holdings realized excess tax benefit of $14,170, $4,978 and $46,164 during the years ended December 31, 2015, 2014 and 2013, respectively.

The Company

Deferred tax assets have resulted primarily from the Company's future deductible temporary differences and NOLs. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company's ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income and tax planning strategies to allow for the utilization of its NOLs and deductible temporary differences. If such estimates and related assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's consolidated statements of income. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. At this time, based on current facts and circumstances, management believes that it is more likely than not that the Company will realize benefit for its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs.

In the normal course of business, the Company engages in transactions in which the income tax consequences may be uncertain. The Company's income tax returns are filed based on interpretation of tax laws and regulations. Such income tax returns are subject to examination by taxing authorities. For financial statement purposes, the Company only recognizes tax positions that it believes are more likely than not of being sustained. There is considerable judgment involved in determining whether positions taken or expected to be taken on the tax return are more likely than not of being sustained.

A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest, is as follows:



Balance at December 31, 2014	$	4,011
Increases related to prior year tax positions	316
Decreases related to prior year tax positions	(88		)
Increases related to current year tax positions	3
Settlements paid in cash	(220		)
Balance at December 31, 2015	$	4,022

As of December 31, 2015, if all uncertain tax positions were sustained at the amounts reported or expected to be reported in the Company's tax returns, the elimination of the Company's unrecognized tax benefits, net of the deferred tax impact, would decrease income tax expense by $2,725.

Interest expense related to uncertain tax positions is included in income tax expense, consistent with the Company's historical policy. After considering the associated deferred tax benefit, interest expense of $314, $284 and $107 has been included in income tax expense attributable to continuing operations in the consolidated statements of income for 2015, 2014 and 2013, respectively. At December 31, 2015, accrued interest on uncertain tax positions of $3,490 was included in other noncurrent liabilities in the consolidated balance sheet.

In January 2014, the Internal Revenue Service informed the Company that the consolidated federal income tax returns for 2009 and 2010 were no longer under examination. Accordingly, in the first quarter of 2014, the Company recorded an income tax benefit of $53,132 associated with the reversal of a noncurrent liability relating to an uncertain tax position from 2009. The statute of limitations with regard to 2009 expired on March 31, 2014.

The most significant jurisdictions in which the Company is required to file income tax returns include the states of New York, New Jersey and Connecticut and the City of New York. The State of New York is presently auditing income tax returns for years 2009 through 2011.

Management does not believe that the resolution of the ongoing income tax examination described above will have a material adverse impact on the financial position of the Company. Changes in the liabilities for uncertain tax positions will be recognized in the interim period in which the positions are effectively settled or there is a change in factual circumstances.