Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2022

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,
	2022			2021			2020
Current:
Federal	$	148		$	74		$	39
State and local		31			26			20
Current income tax expense		179			100			59
Deferred:
Federal		(21	)		(12	)		64
State and local		1			(10	)		11
Deferred income tax (benefit) expense		(20	)		(22	)		75
Total income tax expense	$	159		$	78		$	134

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

	December 31,
	2022			2021
Deferred tax liabilities:
Net book value of property and equipment	$	143		$	146
Broadcast licenses, goodwill and other intangible assets		1,363			1,373
Other		5			-
Total deferred tax liabilities		1,511			1,519
Deferred tax assets:
Liability for accrued bonus		11			9
State and local operating loss carryforwards		10			24
Interest expense limitation		17			4
Other		29			33
Total deferred tax assets		67			70
Valuation allowance for deferred tax assets		(10	)		(22	)
Net deferred tax assets		57			48
Deferred tax liabilities, net of deferred tax assets	$	1,454		$	1,471

As of December 31, 2022, we have an aggregate of approximately $344 million of various state operating loss carryforwards, of which we expect that approximately one-third will be utilized. We expect that approximately $226 million of these state net operating loss carryforwards will not be utilized due to section 382 limitations and those that will expire prior to utilization. After applying our state effective tax rate, this amount is included in our valuation allowance for deferred tax assets.

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, 2022, 2021 and 2020 is as follows (in millions):

	Year Ended December 31,
	2022			2021			2020
Statutory federal rate applied to income before income tax expense	$	129		$	35		$	114
Current year permanent items		5			33			3
State and local taxes, net of federal tax benefit		26			10			27
Change in valuation allowance		-			-			1
Net operating loss carryback		-			-			(7	)
Other items, net		(1	)		-			(4	)
Income tax expense as recorded	$	159		$	78		$	134
Effective income tax rate		26	%		46	%		25	%

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 2022, we decreased our recorded non-current pension liability by $20 million and recognized other comprehensive income of $15 million, net of a $5 million tax provision. 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.

We made income tax payments (net of refunds) of $180 million, $149 million and $70 million, during the years ended December 31, 2022, 2021 and 2020, 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, 2022, we had approximately $15 million of unrecognized tax benefits. All 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 file a federal consolidated income tax return in the United States and state or local consolidated income tax returns in various state or local jurisdictions. Certain of our subsidiaries file separate tax returns in other various state and local jurisdictions. With few exceptions, we are no longer subject to federal, state and local tax examinations by tax authorities for years before 2003.

The following table summarizes the activity related to our reserve for uncertain tax positions (in millions):

	Year Ended December 31,
	2022		2021			2020
Balance at beginning of period	$	15	$	14		$	14
Additions based on tax positions related to prior years		-		3			-
Statute expirations		-		(2	)		-
Balance at end of period	$	15	$	15		$	14

If our reserve for unrecognized tax positions, as presented above, were to be recognized, there would be a favorable impact on the Company’s reported income tax expense in the period recognized.

We recognize accrued interest and penalties related to uncertain tax positions in income tax expense in the accompanying Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income. During the years ended December 31, 2022, 2021, and 2020, our penalty and interest expense related to uncertain tax positions was not material. At December 31, 2022 and 2021, the total accrual for interest and penalties related to uncertain tax positions was $1 million.

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.