Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of components of provision for income tax



	Years Ended December 31,
	2017			2016		2015
	(Dollars in millions)
Income tax expense was as follows:
Federal
Current	$	82		335		28
Deferred	(988		)	5		329
State
Current	21			27		40
Deferred	16			8		21
Foreign
Current	22			26		16
Deferred	(2		)	(7	)	4
Total income tax expense	$	(849	)	394		438



	Years Ended December 31,
	2017			2016		2015
	(Dollars in millions)
Income tax (benefit) expense was allocated as follows:
Income tax (benefit) expense in the consolidated statements of operations:
Attributable to income	$	(849	)	394		438
Stockholders' equity:
Compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes	—			(2	)	(5	)
Tax effect of the change in accumulated other comprehensive loss	81			(109	)	59

Schedule of reconciliation of the statutory federal income tax rate to effective income tax rate

The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:



	Years Ended December 31,
	2017		2016		2015
	(Percentage of pre-tax income)
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	3.9	%	2.3	%	2.6	%
Change in liability for unrecognized tax position	1.0	%	0.2	%	0.4	%
Tax reform	(209.8	)%	—	%	—	%
Net foreign income taxes	(0.7	)%	0.1	%	0.7	%
Foreign dividend paid to a domestic parent company	0.2	%	1.8	%	—	%
Affiliate debt rationalization	—	%	—	%	(2.6	)%
Research and development credits	(1.4	)%	(0.6	)%	(2.1	)%
Tax impact on sale of data centers and colocation business	5.0	%	—	%	—	%
Level 3 acquisition transaction costs	6.0	%	—	%	—	%
Other, net	3.6	%	(0.2	)%	(0.7	)%
Effective income tax rate	(157.2	)%	38.6	%	33.3	%

Schedule of components of deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:



	As of December 31,
	2017			2016
	(Dollars in millions)
Deferred tax assets
Post-retirement and pension benefit costs	$	1,321		2,175
Net operating loss carryforwards	3,951			473
Other employee benefits	112			125
Other	714			342
Gross deferred tax assets	6,098			3,115
Less valuation allowance	(1,341		)	(375	)
Net deferred tax assets	4,757			2,740
Deferred tax liabilities
Property, plant and equipment, primarily due to depreciation differences	(2,935		)	(3,626	)
Goodwill and other intangible assets	(3,785		)	(2,577	)
Other	(16		)	—
Gross deferred tax liabilities	(6,736		)	(6,203	)
Net deferred tax liability	$	(1,979	)	(3,463	)

Summary of the reconciliation of the change in gross unrecognized tax benefits

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2017 and 2016 is as follows:



	2017		2016
	(Dollars in millions)
Unrecognized tax benefits at beginning of year	$	16	15
Assumed in the acquisition of Level 3	18		—
Tax position of prior periods netted against deferred tax assets assumed in the acquisition of Level 3	2		—
Increase in tax positions taken in the current year	1		1
Increase in tax positions taken in the prior year	3		—
Unrecognized tax benefits at end of year	$	40	16