Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of components of provision for income tax



	Years Ended December 31,
	2019			2018		2017
	(Dollars in millions)
Income tax expense (benefit) was as follows:
Federal
Current	$	7		(576	)	82
Deferred	376			734		(988	)
State
Current	15			(22	)	21
Deferred	81			52		16
Foreign
Current	35			36		22
Deferred	(11		)	(54	)	(2	)
Total income tax expense (benefit)	$	503		170		(849	)



	Years Ended December 31,
	2019			2018		2017
	(Dollars in millions)
Income tax (benefit) expense was allocated as follows:
Income tax (benefit) expense in the consolidated statements of operations:
Attributable to income	$	503		170		(849	)
Stockholders' equity:
Compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes	—			—		—
Tax effect of the change in accumulated other comprehensive loss	(62		)	(2	)	81

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,
	2019		2018		2017
	(Percentage of pre-tax income)
Statutory federal income tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal income tax benefit	(1.6	)%	(1.5	)%	3.9	%
Impairment of goodwill	(28.6	)%	(36.6	)%	—	%
Change in liability for unrecognized tax position	(0.2	)%	1.3	%	1.0	%
Tax reform	—	%	(5.9	)%	(209.8	)%
Net foreign income taxes	(0.5	)%	1.8	%	(0.7	)%
Foreign dividend paid to a domestic parent company	—	%	—	%	0.2	%
Research and development credits	0.1	%	0.9	%	(1.4	)%
Tax impact on sale of data centers and colocation business	—	%	—	%	5.0	%
Tax benefit of net operating loss carryback	—	%	9.1	%	—	%
Level 3 acquisition transaction costs	—	%	—	%	6.0	%
Other, net	(0.8	)%	(1.0	)%	3.6	%
Effective income tax rate	(10.6	)%	(10.9	)%	(157.2	)%

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,
	2019			2018
	(Dollars in millions)
Deferred tax assets
Post-retirement and pension benefit costs	$	1,169		1,111
Net operating loss carryforwards	3,167			3,445
Other employee benefits	134			162
Other	577			553
Gross deferred tax assets	5,047			5,271
Less valuation allowance	(1,319		)	(1,331	)
Net deferred tax assets	3,728			3,940
Deferred tax liabilities
Property, plant and equipment, primarily due to depreciation differences	(3,489		)	(3,011	)
Goodwill and other intangible assets	(3,019		)	(3,303	)
Other	—			(23	)
Gross deferred tax liabilities	(6,508		)	(6,337	)
Net deferred tax liability	$	(2,780	)	(2,397	)

Summary of NOLs

If unused, the NOLs will expire between 2022 and 2037. The U.S. federal net operating loss carryforwards expire as follows:



Expiring	Amount
December 31,	(Dollars in millions)
2022	$	177
2023	614
2024	1,403
2025	1,042
2026	1,525
2027	375
2028	637
2029	645
2030	668
2031	733
2032	348
2033	238
2037	2,973
NOLs per return	11,378
Uncertain tax positions	(5,183		)
Financial NOLs	$	6,195

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 2019 and 2018 is as follows:



	2019			2018
	(Dollars in millions)
Unrecognized tax benefits at beginning of year	$	1,587		40
Increase in tax positions of the current year netted against deferred tax assets	11			—
Increase in tax positions of prior periods netted against deferred tax assets	6			1,353
Decrease in tax positions of the current year netted against deferred tax assets	(49		)	(15	)
Decrease in tax positions of prior periods netted against deferred tax assets	(19		)	—
Increase in tax positions taken in the current year	5			4
Increase in tax positions taken in the prior year	10			211
Decrease due to payments/settlements	(8		)	(1	)
Decrease from the lapse of statute of limitations	—			(2	)
Decrease due to the reversal of tax positions taken in a prior year	(5		)	(3	)
Unrecognized tax benefits at end of year	$	1,538		1,587