Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10. Income Taxes

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change.

Under certain circumstances, we recognize liabilities in our financial statements for positions taken on uncertain tax issues. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits on the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits are classified as income tax expense in the statement of operations.

Federal and state and local income tax expense is summarized as follows (in millions):

	Year Ended December 31,
	2021			2020		2019
Current:
Federal	$	74		$	39	$	8
State and local		26			20		13
Current income tax expense		100			59		21
Deferred:
Federal		(12	)		64		54
State and local		(10	)		11		1
Deferred income tax expense		(22	)		75		55
Total income tax expense	$	78		$	134	$	76

Significant components of our deferred tax liabilities and assets are as follows (in millions):

	December 31,
	2021			2020
Deferred tax liabilities:
Net book value of property and equipment	$	146		$	92
Broadcast licenses, goodwill and other intangible assets		1,373			878
Total deferred tax liabilities		1,519			970
Deferred tax assets:
Liability for accrued vacation		5			4
Liability for accrued bonus		9			5
Deferred payroll taxes		2			3
Allowance for credit losses		4			3
Liability for pension plan		6			11
Federal operating loss carryforwards		2			38
State and local operating loss carryforwards		24			21
Acquisition costs		2			2
Restricted stock		4			4
Investments		4			4
Interest expense limitation		4			4
Other		4			1
Total deferred tax assets		70			100
Valuation allowance for deferred tax assets		(22	)		(15	)
Net deferred tax assets		48			85
Deferred tax liabilities, net of deferred tax assets	$	1,471		$	885

As of December 31, 2021, we have approximately $10 million of federal operating loss carryforwards that we expect to utilize in 2022. Additionally, we have an aggregate of approximately $424 million of various state operating loss carryforwards, of which we expect that approximately half will be utilized.

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 is as follows (in millions):

	Year Ended December 31,
	2021			2020			2019
Statutory federal rate applied to income before income tax expense	$	35		$	114		$	53
Current year permanent items		33			3			13
State and local taxes, net of federal tax benefit		10			27			13
Change in valuation allowance		-			1			(2	)
Net operating loss carryback		-			(7	)		-
Other items, net		-			(4	)		(1	)
Income tax expense as recorded	$	78		$	134		$	76
Effective income tax rate		46	%		25	%		30	%

As of each year end, we are required to adjust our pension liability to an amount equal to the funded status of our pension plans with a corresponding adjustment to other comprehensive income on a net of tax basis. During 2021, we decreased our recorded non-current pension liability by $16 million and recognized other comprehensive income of $12 million, net of a $4 million tax provision. During 2020, we increased our recorded non-current pension liability by $10 million and recognized other comprehensive loss of $8 million, net of a $2 million tax benefit. During 2019, we increased our recorded non-current pension liability by $7 million and recognized other comprehensive loss of $5 million, net of a $2 million tax benefit.

We made income tax payments (net of refunds) of $149 million, $70 million and $23 million, during the years ended December 31, 2021, 2020 and 2019, respectively.

We prescribe a recognition threshold and measurement attribution for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

As of December 31, 2021, we had approximately $16 million of unrecognized tax benefits. These unrecognized tax benefits would impact our effective tax rate if recognized. The liability for unrecognized tax benefits is recorded net of any federal tax benefit that would result from payment. We have accrued estimates of interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2021, we had recorded a liability for potential penalties and interest of approximately $1 million related to uncertain tax positions. While it is difficult to calculate with any certainty, we estimate no change, exclusive of interest and penalties, will be recorded for uncertain tax positions over the next twelve months.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 global pandemic. The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020, and permits net operating loss carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. During 2020, we carried back certain NOLs resulting in a refund of $21 million, that is currently outstanding.

We file income tax returns in the United States federal and multiple state jurisdictions. We have net operating losses (historic and acquired, through recent business combinations) that extend our open adjustment period related to federal and state tax audits from 2000 through 2018. The open years vary by entity and jurisdiction.