INCOME TAXES

12 Months Ended

Dec. 31, 2019

Altice USA files a federal consolidated and certain state combined income tax returns with its 80% or more owned subsidiaries. CSC Holdings and its subsidiaries are included in the consolidated federal income tax returns of Altice USA. 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. In accordance with a tax sharing agreement between CSC Holdings and Altice USA, CSC Holdings has an obligation to Altice USA for its stand-alone current tax liability as if it filed separate income tax returns.

Income tax expense (benefit) for the years ended December 31, 2019, 2018 and 2017 consist of the following components:


	Altice USA										CSC Holdings
	Years Ended December 31,										Years Ended December 31,
	2019		2018		2017		2019		2018		2017
Current expense (benefit):
Federal	$	—	$	(1,865)	$	5,261	$	240,229	$	186,035	$	151,120
State	33,103		32,347		12,530		70,567		124,106		47,900
	33,103		30,482		17,791		310,796		310,141		199,020
Deferred expense (benefit):
Federal	43,105		26,141		(2,095,930)		(176,591)		(102,872)		(2,154,344)
State	(28,174)		(93,744)		(784,224)		(62,118)		(148,721)		(872,438)
	14,931		(67,603)		(2,880,154)		(238,709)		(251,593)		(3,026,782)
Tax expense (benefit) relating to uncertain tax positions	(844)		(1,534)		11		(844)		(985)		11
Income tax expense (benefit)	$	47,190	$	(38,655)	$	(2,862,352)	$	71,243	$	57,563	$	(2,827,751)

The income tax expense (benefit) attributable to Altice USA's operations differs from the amount derived by applying the statutory federal rate to pretax loss principally due to the effect of the following items:


	Altice USA										CSC Holdings
	Years Ended December 31,										Years Ended December 31,
	2019		2018		2017		2019		2018		2017
Federal tax expense (benefit) at statutory rate	$	39,297	$	(3,793)	$	(478,656)	$	59,653	$	66,757	$	(83,507)
State income taxes, net of federal impact	(6,256)		(8,103)		(61,698)		(9,060)		33,249		(23,720)
Changes in the valuation allowance	4,079		15,987		(111)		4,307		—		—
Impact of Federal Tax Reform	—		—		(2,332,677)		—		—		(2,731,324)
Changes in the state rates used to measure deferred taxes, net of federal impact	(1,046)		(52,915)		(12,896)		6,532		(53,493)		(12,999)
Tax benefit relating to uncertain tax positions	(847)		(514)		(253)		(847)		(514)		(253)
Non-deductible share-based compensation related to the carried unit plan	15,642		8,677		20,101		15,642		8,677		20,101
Other non-deductible expenses	1,334		2,200		3,405		1,334		2,011		3,383
Other, net	(5,013)		(194)		433		(6,318)		876		568
Income tax expense (benefit)	$	47,190	$	(38,655)	$	(2,862,352)	$	71,243	$	57,563	$	(2,827,751)

In late 2017, the United States enacted the Tax Cuts and Jobs Act of 2017 (the "Tax Reform") which significantly changed the existing U.S. tax law by implementing a reduction in the corporate tax rate to 21%, moving from a worldwide tax system to a territorial system and imposing new or additional limitations on the deductibility of interest expense and executive compensation.

For the year ended December 31, 2017, Altice USA recorded a non-cash deferred tax benefit of $2,332,677 and CSC Holdings recorded a non-cash deferred tax benefit of $2,731,324, resulting primarily from a decrease in the deferred tax liabilities with regard to fixed assets and intangibles, partially offset by a decrease in the deferred tax asset for the federal net operating loss carry forward ("NOL").

During 2018, the Company determined that it met the definition of a Qualified Technology Company for New York State tax purposes and thereby was eligible for the reduced tax rate. Additionally, during 2018, the state of New Jersey enacted significant tax law changes imposing a 2.5% surtax for tax years beginning January 1, 2018 and mandating combined return filing requirements for unitary corporations for tax years beginning January 1, 2019. Accordingly, Altice USA and CSC Holdings recorded a net non-cash deferred tax benefit of $52,915 and $53,493, respectively, based on a remeasurement of the net deferred tax liability.

The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance are as follows:


	Altice USA						CSC Holdings
	December 31,						December 31,
	2019		2018		2019		2018
Noncurrent
NOLs and tax credit carry forwards	$	309,924	$	571,413	$	74,300	$	16,465
Compensation and benefit plans	25,227		42,484		25,227		45,138
Partnership investments	49,956		60,413		49,956		60,413
Restructuring liability	11,280		9,364		11,280		9,364
Other liabilities	42,339		38,473		42,339		36,833
Liabilities under derivative contracts	43,175		20,846		43,175		20,847
Interest deferred for tax purposes	333,856		166,668		333,856		34,843
Operating lease Liability	82,393		—		82,393		—
Other	12,428		11,531		12,428		9,867
Deferred tax asset	910,578		921,192		674,954		233,770
Valuation allowance	(29,479)		(25,400)		(11,859)		(8,225)
Net deferred tax asset, noncurrent	881,099		895,792		663,095		225,545
Fixed assets and intangibles	(5,384,320)		(5,496,103)		(5,384,320)		(5,473,397)
Operating lease Asset	(75,019)		—		(75,019)		—
Investments	(116,702)		(71,167)		(116,702)		(71,168)
Prepaid expenses	(10,978)		(7,543)		(10,978)		(7,543)
Fair value adjustments related to debt and deferred financing costs	(56,675)		(40,083)		(56,675)		(18,111)
Other	—		(4,833)		—		(5,273)
Deferred tax liability, noncurrent	(5,643,694)		(5,619,729)		(5,643,694)		(5,575,492)
Total net deferred tax liability	$	(4,762,595)	$	(4,723,937)	$	(4,980,599)	$	(5,349,947)

As of December 31, 2019, Altice USA's federal NOLs were approximately $840,576. The utilization of certain pre-merger NOLs of Cablevision and Cequel are limited pursuant to Internal Revenue Code Section 382. The Company does not expect such limitations to impact the ability to utilize the NOLs prior to their expiration.

As of December 31, 2019, Altice USA has $12,161 of alternative minimum tax credits which do not expire and $17,824 of research credits, expiring in varying amounts from 2023 through 2035. Pursuant to the Tax Reform elimination of the AMT liability, Altice USA has submitted a refund request for 75% of the prior year’s AMT.

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. In evaluating the need for a valuation allowance, management takes into account various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable 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 operations. Management evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly. Pursuant to the Cablevision Acquisition and Cequel Acquisition, deferred tax liabilities resulting from the book fair value adjustment increased significantly and future taxable income that will result from the reversal of existing taxable temporary differences for which deferred tax liabilities are recognized is sufficient to conclude it is more likely than not that the Company will realize all of its gross deferred tax assets, except those deferred tax assets against which a valuation allowance has been recorded which relate to certain state NOLs and the Israeli NOL in i24NEWS.

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.

As of December 31, 2019, 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 $1,720.

The most significant jurisdictions in which the Company is required to file income tax returns include the states of New York, New Jersey, Connecticut, the City of New York, Texas and West Virginia. The State and City of New York are presently auditing income tax returns for years 2012 through 2014. The States of New Jersey and Connecticut are presently auditing income tax returns for years 2014 through 2017 and 2016 and 2017, respectively.

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.