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

11.Income Taxes and Accounting for Uncertainty in Income Taxes

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.

We file consolidated tax returns in the United States. 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.

As of December 31, 2024, we had $543 million net operating loss carryforwards (“NOLs”) for federal income tax purposes, $277 million of NOL carryforwards for state income tax purposes and $201 million of foreign NOL carryfowards which are partially offset by a valuation allowance. In addition, there are $389 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	$	(20,241)	$	(7,484)	$	(1,283)
State		23,007		39,441		70,707
Foreign		17,898		8,405		(601)
Total current (benefit) provision		20,664		40,362		68,823
Deferred (benefit) provision:
Federal		(35,837)		(308,917)		638,077
State		(60,930)		(150,108)		93,755
Foreign		(23,653)		(45,006)		(20,965)
Increase (decrease) in valuation allowance		148,701		166,809		18,720
Total deferred (benefit) provision		28,281		(337,222)		729,587
Total (benefit) provision	$	48,945	$	(296,860)	$	798,410

Our $76 million loss of “Income (loss) before income taxes” on our Consolidated Statements of Operations and Comprehensive Income (Loss) included a loss of $103 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	62.9	3.6	3.3
Rates different than statutory	(8.6)	1.1	(0.5)
Increase (decrease) in valuation allowance	(196.8)	(8.6)	0.6
Tax credits	62.5	3.8	(0.8)
Impairments	—	(6.0)	—
Other, net	(5.8)	0.5	0.3
Total (benefit) provision for income taxes	(64.8)	15.4	23.9

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	$	1,986,276	$	1,322,706
Accrued and prepaid expenses		1,013,457		966,445
Stock-based compensation		31,061		29,387
Unrealized (gains) losses on available for sale and other investments (1)		58,587		222,769
Discount on convertible notes and convertible note hedge transaction, net		696		46,636
Deferred revenue		6,369		10,748
Other		3,602		10,096
Total deferred tax assets		3,100,048		2,608,787
Valuation allowance		(564,306)		(492,340)
Deferred tax asset after valuation allowance		2,535,742		2,116,447
Deferred tax liabilities:
Depreciation		(1,996,186)		(1,961,227)
Regulatory authorizations and other intangible amortization		(4,187,034)		(3,960,608)
Bases differences in partnerships and cost method investments (2)		(1,312,328)		(1,179,418)
Other liabilities		(21,752)		(21,227)
Total deferred tax liabilities		(7,517,300)		(7,122,480)
Net deferred tax asset (liability) (3)	$	(4,981,558)	$	(5,006,033)

(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 6 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.

(3) The presentation of net deferred tax liability includes both deferred tax liabilities and deferred tax assets. Certain foreign deferred tax assets are presented as part of “Other noncurrent assets, net” on our Consolidated Balance Sheets and our deferred tax liabilities related to all other jurisdictions are reported separately as “Deferred tax liabilities, net” on our Consolidated Balance Sheets.

As of December 31, 2024, we had undistributed earnings attributable to foreign subsidiaries for which no provision for U.S. income taxes or foreign withholding taxes has been made because it is expected that such earnings will be reinvested outside the U.S. indefinitely. It is not practicable to determine the amount of the unrecognized deferred tax liability at this time.

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. We are subject to United States federal, state and local income tax examinations by tax authorities for the years as early as tax year 2008. We are currently under a federal income tax examination for years 2008 through 2011, 2013 through 2016, and 2018 through 2019. We also file income tax returns in the United Kingdom, Germany, Brazil, India and a number of other foreign jurisdictions. We generally are open to income tax examination in these foreign jurisdictions for taxable years beginning in 2004.

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	$	609,543	$	569,601	$	539,113
Additions based on tax positions related to the current year		251,296		9,210		36,587
Additions based on tax positions related to prior years		23,794		41,522		16,369
Reductions based on tax positions related to prior years		(24,996)		(7,219)		(21,541)
Reductions based on tax positions related to settlements with taxing authorities		—		(3,219)		—
Reductions based on tax positions related to the lapse of the statute of limitations		(310)		(352)		(927)
Balance, end of period	$	859,327	$	609,543	$	569,601

We have $812 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 $165 million at December 31, 2024 and 2023, respectively. The above table excludes these amounts.