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Income Taxes
 12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes

Liberty Global files its primary income tax return in the U.K. Its subsidiaries file income tax returns in the U.K., the U.S., the Netherlands and a number of other jurisdictions. The income taxes of Liberty Global and its subsidiaries are presented on a separate return basis for each tax-paying entity or group.

The components of our earnings (loss) from continuing operations before income taxes are as follows:
 
Year ended December 31,
 
2016
 
2015
 
2014
 
in millions
 
 
 
 
 
 
U.K.
$
930.7

 
$
778.1

 
$
585.7

U.S.
(848.5
)
 
(924.5
)
 
(1,105.6
)
Switzerland
274.6

 
395.3

 
326.1

The Netherlands
127.4

—

(1,353.3
)
—

(644.5
)
Germany
(49.3
)
 
(5.1
)
 
(294.7
)
Chile
47.4

 
182.3

 
43.1

Panama
19.4

 
—

 
—

Belgium
13.7

—

175.4

—

21.5

Other
34.0

 
67.2

 
12.5

Total
$
549.4

 
$
(684.6
)
 
$
(1,055.9
)

Income tax benefit (expense) consists of:
 
Current
 
Deferred
 
Total
 
in millions
Year ended December 31, 2016:
 
 
 
 
 
The Netherlands
$
(0.4
)
 
$
1,315.3

 
$
1,314.9

U.S. (a)
146.9

 
88.3

 
235.2

Chile
(134.3
)
 
(11.2
)
 
(145.5
)
Belgium
(105.0
)
 
57.0

 
(48.0
)
Switzerland
(48.5
)
 
5.3

 
(43.2
)
Germany
(77.9
)
 
41.0

 
(36.9
)
Panama
(18.6
)
 
14.1

 
(4.5
)
U.K.
(15.3
)
 
17.0

 
1.7

Other
(49.0
)
 
(6.8
)
 
(55.8
)
Total
$
(302.1
)
 
$
1,520.0

 
$
1,217.9

 
 
 
 
 
 
Year ended December 31, 2015:
 
 
 
 
 
U.K
$
(0.9
)
 
$
(208.5
)
 
$
(209.4
)
The Netherlands
2.5

 
159.0

 
161.5

Belgium
(125.4
)
 
11.1

 
(114.3
)
Switzerland
(63.2
)
 
(14.7
)
 
(77.9
)
Chile
(57.4
)
 
13.5

 
(43.9
)
Germany
(66.7
)
 
24.3

 
(42.4
)
U.S. (a)
(81.2
)
 
58.7

 
(22.5
)
Other
(22.7
)
 
6.7

 
(16.0
)
Total
$
(415.0
)
 
$
50.1

 
$
(364.9
)
 
 
 
 
 
 
Year ended December 31, 2014:
 
 
 
 
 
Continuing operations:
 
 
 
 
 
U.K.
$
(2.1
)
 
$
113.4

 
$
111.3

U.S. (a)
(22.5
)
 
129.6

 
107.1

Belgium
(138.7
)
 
31.7

 
(107.0
)
Switzerland
(76.8
)
 
3.1

 
(73.7
)
The Netherlands
11.1

 
42.5

 
53.6

Germany
(22.6
)
 
37.0

 
14.4

Chile
17.1

 
(24.1
)
 
(7.0
)
Other
(41.1
)
 
17.4

 
(23.7
)
Total — continuing operations
$
(275.6
)
 
$
350.6

 
$
75.0

Discontinued operation
$
—

 
$
(0.1
)
 
$
(0.1
)
_______________

(a)
Includes federal and state income taxes. Our U.S. state income taxes were not material during any of the years presented.



Income tax benefit (expense) attributable to our earnings (loss) from continuing operations before income taxes differs from the amounts computed using the applicable income tax rate as a result of the following factors:
 
Year ended December 31,
 
2016
 
2015
 
2014
 
in millions
 
 
 
 
 
 
Computed “expected” tax benefit (expense) (a)
$
(109.9
)
 
$
136.9

 
$
221.7

Change in valuation allowances (b):
 
 
 
 
 
Benefit
1,149.1

 
6.8

 
11.9

Expense
(260.4
)
 
(508.3
)
 
(373.1
)
Recognition of previously unrecognized tax benefits
212.5

 
44.4

 
29.5

Non-deductible or non-taxable foreign currency exchange results (b):
 
 
 
 
 
Benefit
228.0

 
53.2

 
71.9

Expense
(34.3
)
 
(5.1
)
 
(16.3
)
Tax effect of intercompany financing
173.7

 
154.9

 
166.9

Non-deductible or non-taxable interest and other expenses (b):
 
 
 
 
 
Expense
(234.9
)
 
(106.6
)
 
(236.5
)
Benefit
63.8

 
48.1

 
58.0

Enacted tax law and rate changes (c)
(162.2
)
 
(280.5
)
 
23.9

International rate differences (b) (d):
 
 
 
 
 
Benefit
138.1

 
200.8

 
266.4

Expense
(43.0
)
 
(52.7
)
 
(27.6
)
Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (b):
 
 
 
 
 
Benefit
173.6

 
3.3

 
32.6

Expense
(110.8
)
 
(96.9
)
 
(168.0
)
Other, net
34.6

 
36.8

 
13.7

Total income tax benefit (expense)
$
1,217.9

 
$
(364.9
)
 
$
75.0

_______________

(a)
The statutory or “expected” tax rates are the U.K. rates of 20.0% for 2016 and 2015 and 21.0% for 2014.

(b)
Country jurisdictions giving rise to income tax benefits are grouped together and shown separately from country jurisdictions giving rise to income tax expenses.

(c)
During 2015, the U.K. enacted legislation that will change the corporate income tax rate from the current rate of 20.0% to 19.0% in April 2017 and 18.0% in April 2020. Substantially all of the impact of these rate changes on our deferred tax balances was recorded in the fourth quarter of 2015 when the change in law was enacted. During the third quarter of 2016, the U.K. enacted legislation that will further reduce the corporate income tax rate in April 2020 from 18.0% to 17.0%. Substantially all of the impact of this rate change on our deferred tax balances was recorded during the third quarter of 2016.

(d)
Amounts reflect adjustments (either a benefit or expense) to the “expected” tax benefit (expense) for statutory rates in jurisdictions in which we operate outside of the U.K.
The components of our deferred tax assets are as follows: 
 
December 31,
 
2016
 
2015
 
in millions
 
 
 
 
Deferred tax assets (a)
$
3,024.7

 
$
2,342.9

Deferred tax liabilities (a)
(1,307.8
)
 
(1,785.7
)
Net deferred tax asset
$
1,716.9

 
$
557.2

_______________ 

(a)
Our deferred tax assets and liabilities are included in other assets, net and other long-term liabilities, respectively, in our consolidated balance sheets.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: 
 
December 31,
 
2016
 
2015
 
in millions
Deferred tax assets:
 
 
 
Net operating loss and other carryforwards
$
6,598.0

 
$
5,873.2

Property and equipment, net
2,028.9

 
2,583.1

Debt
1,626.3

 
1,611.7

Intangible assets
99.5

 
112.4

Derivative instruments
68.3

 
173.1

Other future deductible amounts
399.6

 
272.5

Deferred tax assets
10,820.6

 
10,626.0

Valuation allowance
(6,015.4
)
 
(6,395.6
)
Deferred tax assets, net of valuation allowance
4,805.2

 
4,230.4

Deferred tax liabilities:
 
 
 
Property and equipment, net
(1,076.9
)
 
(1,053.4
)
Intangible assets
(901.6
)
 
(1,826.5
)
Investments (including consolidated partnerships)
(485.9
)
 
(374.5
)
Derivative instruments
(175.5
)
 
(280.7
)
Other future taxable amounts
(448.4
)
 
(138.1
)
Deferred tax liabilities
(3,088.3
)
 
(3,673.2
)
Net deferred tax asset
$
1,716.9

 
$
557.2



Our deferred income tax valuation allowance decreased $380.2 million in 2016. This decrease reflects the net effect of (i) business acquisitions, (ii) the net tax benefit related to our continuing operations of $888.7 million, including a tax benefit of $1.1 billion recognized in the Netherlands upon the release of valuation allowances in the fourth quarter of 2016, (iii) foreign currency translation adjustments, (iv) the effect of enacted tax law and rate changes and (v) other individually insignificant items. The release of valuation allowances in the Netherlands is attributable to a significant improvement in our forecast of taxable income in the Netherlands, due to, among other factors, the impact of contributing Ziggo Group Holding to the Dutch JV on December 31, 2016, as further described in note 5.
 
Virgin Media had property and equipment on which future U.K. tax deductions can be claimed of $17.9 billion and $21.0 billion at December 31, 2016 and 2015, respectively. The maximum amount of these “capital allowances” that can be claimed in any one year is 18% of the remaining balance, after additions, disposals and prior claims. The tax effects of the excess of these
capital allowances over the related financial reporting bases are included in the 2016 and 2015 deferred tax assets related to property and equipment, net, in the above table.

At December 31, 2016, our unrecognized excess tax benefits aggregated $139.0 million. These excess tax benefits, which represent tax deductions in excess of the financial reporting expense for share-based compensation, have not been recognized for financial reporting purposes as these tax benefits have not been realized as a reduction of income taxes payable. The tax effects of these unrecognized excess tax benefits are not included in the above table. For additional information regarding the adoption of ASU 2016-09, which will impact the accounting for unrecognized excess tax benefits beginning January 1, 2017, see note 2.

The significant components of our tax loss carryforwards and related tax assets at December 31, 2016 are as follows: 
Country
 
Tax loss
carryforward
 
Related
tax asset
 
Expiration
date
 
in millions
 
 
U.K.:
 
 
 
 
 
Amount attributable to capital losses
$
20,335.9

 
$
3,457.1

 
Indefinite
Amount attributable to net operating losses
2,563.4

 
435.8

 
Indefinite
The Netherlands
4,108.7

 
1,027.2

 
2017-2025
Germany
1,608.1

 
259.5

 
Indefinite
U.S.
1,268.0

 
320.1

 
2019-2036
Luxembourg
1,124.1

 
292.4

 
Indefinite
Belgium
894.2

 
303.9

 
Indefinite
Barbados
817.9

 
52.4

 
2017 - 2023
Ireland
601.9

 
75.2

 
Indefinite
France
505.4

 
146.2

 
Indefinite
Jamaica
449.7

 
149.9

 
Indefinite
Hungary
166.8

 
15.0

 
2020-2025
Other
264.9

 
63.3

 
Various
Total
$
34,709.0

 
$
6,598.0

 
 


Our tax loss carryforwards within each jurisdiction combine all companies’ tax losses (both capital and ordinary losses) in that jurisdiction, however, certain tax jurisdictions limit the ability to offset taxable income of a separate company or different tax group with the tax losses associated with another separate company or group. Further, tax jurisdictions restrict the type of taxable income that the above losses are able to offset. The majority of the tax losses shown in the above table are not expected to be realized, including certain losses that are limited in use due to change in control or same business tests.

We have taxable outside basis differences on certain investments in non-U.S. subsidiaries. We intend to indefinitely reinvest earnings from these non-U.S. operations. At December 31, 2016, income and withholding taxes for which a net deferred tax liability might otherwise be required have not been provided on an estimated $6.9 billion of cumulative temporary differences (including, for this purpose, any difference between the aggregate tax basis in stock of a consolidated subsidiary and the corresponding amount of the subsidiary’s net equity, including cumulative translation adjustments, determined for financial reporting purposes) on non-U.S. entities. The determination of the additional withholding tax that would arise upon a reversal of these temporary differences is impractical to estimate as it is subject to offset by available foreign tax credits and subject to certain limitations.

In general, a U.K. or U.S. corporation may claim a foreign tax credit against its income tax expense for foreign income taxes paid or accrued. A U.S. corporation may also claim a credit for foreign income taxes paid or accrued on the earnings of a foreign corporation paid to the U.S. corporation as a dividend.

Our ability to claim a foreign tax credit for dividends received from our foreign subsidiaries or foreign taxes paid or accrued is subject to various significant limitations under U.S. tax laws, including a limited carry back and carry forward period. Some of our operating companies are located in countries with which the U.K. or U.S. does not have income tax treaties. Because we lack treaty protection in these countries, we may be subject to high rates of withholding taxes on distributions and other payments from
these operating companies and may be subject to double taxation on our income. Limitations on the ability to claim a foreign tax credit, lack of treaty protection in some countries and the inability to offset losses in one jurisdiction against income earned in another jurisdiction could result in a high effective tax rate on our earnings. Since a significant portion of our revenue is generated outside of the U.K. and substantially all of our revenue is generated outside the U.S., including in jurisdictions that do not have tax treaties with the U.K. or U.S., these risks are greater for us than for companies that generate most of their revenue in the U.K. or U.S. or in jurisdictions that have these treaties.

Through our subsidiaries, we maintain a presence in many countries. Many of these countries maintain highly complex tax regimes that differ significantly from the system of income taxation used in the U.K. and the U.S. We have accounted for the effect of these taxes based on what we believe is reasonably expected to apply to us and our subsidiaries based on tax laws currently in effect and reasonable interpretations of these laws. Because some jurisdictions do not have systems of taxation that are as well established as the system of income taxation used in the U.K., U.S. or tax regimes used in other major industrialized countries, it may be difficult to anticipate how other jurisdictions will tax our and our subsidiaries’ current and future operations.

We and our subsidiaries file consolidated and standalone income tax returns in various jurisdictions. In the normal course of business, our income tax filings are subject to review by various taxing authorities. In connection with such reviews, disputes could arise with the taxing authorities over the interpretation or application of certain income tax rules related to our business in that tax jurisdiction. Such disputes may result in future tax and interest and penalty assessments by these taxing authorities. The ultimate resolution of tax contingencies will take place upon the earlier of (i) the settlement date with the applicable taxing authorities in either cash or agreement of income tax positions or (ii) the date when the tax authorities are statutorily prohibited from adjusting the company’s tax computations.

In general, tax returns filed by our company or our subsidiaries for years prior to 2008 are no longer subject to examination by tax authorities. Certain of our subsidiaries are currently involved in income tax examinations in various jurisdictions in which we operate, including Austria (2012 through 2014), Chile (2011 through 2015), the Czech Republic (2013), Germany (2008 through 2014), the Netherlands (2015 through 2016), Panama (2013 through 2015), Poland (2010 and 2013), Trinidad and Tobago (2006 through 2009), the U.S. (2009 through 2011 and 2016) and certain other jurisdictions within the Caribbean and Latin America. Except as noted below, any adjustments that might arise from the foregoing examinations are not expected to have a material impact on our consolidated financial position or results of operations. In the U.S., we have received notices of adjustment from the Internal Revenue Service with respect to our 2010 and 2009 income tax returns, and have entered into the appeals process with respect to the 2010 and 2009 matters. In Chile, adjustments received from the tax authorities for the tax years 2011 and 2012 are in dispute. We have appealed these adjustments to the Chilean tax court. Also in Chile, we recorded an income tax receivable in connection with the expected utilization of certain net operating loss carryforwards upon the completion of a merger transaction of two indirect subsidiaries of Liberty Global. We are engaged in an ongoing examination by tax authorities in Chile in connection with this receivable and were notified during the third quarter of 2016 that approximately 48% of our claim has been agreed by the tax authorities. We intend to pursue the payment of the remaining portion of this receivable through available method. While we believe that the ultimate resolution of these proposed adjustments will not have a material impact on our consolidated financial position, results of operations or cash flows, no assurance can be given that this will be the case given the amounts involved and the complex nature of the related issues.
 
The changes in our unrecognized tax benefits are summarized below: 
 
2016
 
2015
 
2014
 
in millions
 
 
 
 
 
 
Balance at January 1
$
609.9

 
$
513.5

 
$
490.9

Reductions for tax positions of prior years
(184.2
)
 
(42.2
)
 
(50.2
)
Additions for tax positions of prior years
112.9

 
27.0

 
64.5

Lapse of statute of limitations
(84.6
)
 
(8.3
)
 
(1.9
)
Effects of business acquisitions
38.0

 
—

 
—

Additions based on tax positions related to the current year
33.5

 
142.3

 
38.2

Foreign currency translation
(10.9
)
 
(22.3
)
 
(27.0
)
Settlements with tax authorities
(13.5
)
 
(0.1
)
 
(1.0
)
Balance at December 31
$
501.1

 
$
609.9

 
$
513.5



No assurance can be given that any of these tax benefits will be recognized or realized.

As of December 31, 2016, our unrecognized tax benefits included $438.3 million of tax benefits that would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances and other factors.

During 2017, it is reasonably possible that the resolution of ongoing examinations by tax authorities as well as expiration of statutes of limitation could result in reductions to our unrecognized tax benefits related to tax positions taken as of December 31, 2016. Other than the potential impacts of these ongoing examinations and the expected expiration of certain statutes of limitation, we do not expect any material changes to our unrecognized tax benefits during 2017. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during 2017.

During 2016, 2015 and 2014, the income tax benefit (expense) of our continuing operations includes net income tax benefit (expense) of $15.7 million, ($10.3 million) and ($10.9 million), respectively, representing the net benefit (accrual) of interest and penalties during the period. Our other long-term liabilities include accrued interest and penalties of $50.1 million at December 31, 2016.