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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the income tax expense are as follows:
Years Ended December 31,
202320222021
(Dollars in millions)
Federal
Current$(1)— — 
Deferred(9)271 125 
State and local
Current8 21 12 
Deferred(11)4 28 
Foreign
Current1 26 16 
Deferred10 (66)16 
Total income tax (benefit) expense$(2)256 197 

Years Ended December 31,
202320222021
(Dollars in millions)
Income tax (benefit) expense was allocated as follows:
Income tax (benefit) expense in the consolidated statements of operations:
Attributable to income$(2)256 197 
Member's equity:
Tax effect of the change in accumulated other comprehensive loss$3 (58)(30)

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

Years Ended December 31,
202320222021
(Percentage of pre-tax income)
Statutory federal income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal income tax benefit0.3 %(0.3)%4.1 %
Goodwill impairment(19.4)%(21.4)%— %
Divestiture of business(1)
(2.5)%(5.1)%— %
Net foreign income tax— %0.2 %1.6 %
Research and development credits0.1 %0.1 %(0.4)%
Other, net0.6 %(0.1)%(1.1)%
Effective income tax rate0.1 %(5.6)%25.2 %
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(1)Includes Global Intangible Low-Taxes Income ("GILTI") incurred as a result of the sale of our Latin American business.
For the year ended December 31, 2023, the effective tax rate is 0.1% compared to (5.6)% and 25.2% for the years ended December 31, 2022 and 2021, respectively. The effective tax rate for the year ended December 31, 2023 includes a $389 million unfavorable impact of a non-deductible goodwill impairment charge recorded in the second quarter of 2023.The effective tax rate for the year ended December 31, 2022 includes a $969 million unfavorable impact of non-deductible goodwill impairment and a $256 million unfavorable impact related to incurring GILTI as a result of the sale of our Latin American business.

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,
20232022
(Dollars in millions)
Deferred tax assets
Deferred revenue$— 261 
Net operating loss carry forwards1,598 1,680 
Property, plant and equipment— 92 
Other575 448 
Gross deferred tax assets2,173 2,481 
Less valuation allowance(248)(303)
Net deferred tax assets1,925 2,178 
Deferred tax liabilities
Deferred revenue— (5)
Property, plant and equipment(1,189)(1,142)
Intangible assets(1,063)(1,328)
Other(9)(58)
Gross deferred tax liabilities(2,261)(2,533)
Net deferred tax liabilities$(336)(355)

Of the $336 million and $355 million net deferred tax liabilities as of December 31, 2023 and 2022, respectively, $375 million and $387 million is reflected as a long-term liability, in other on our consolidated balance sheets and $39 million and $32 million is reflected as a net noncurrent deferred tax asset, in other, net on our consolidated balance sheets.

As of December 31, 2023, we had gross federal NOLs net of uncertain tax positions of $6.3 billion, which will expire between 2026 and 2037 if unused, and state NOLs net of uncertain tax positions of $6.1 billion. Our deferred tax asset balance is based on our historical balance and subsequent standalone activity since we were acquired by Lumen in 2017 and does not correspond to the amount of NOLs that are available for use by Lumen.

We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize. As of December 31, 2023, a valuation allowance of $248 million was recorded as it is more likely than not that this amount of net operating loss and tax credit carryforwards will not be utilized prior to expiration. Our valuation allowance as of December 31, 2023 and 2022 is primarily related to federal capital loss carry forwards and state NOL carryforwards.
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 2023 and 2022 is as follows:
20232022
(Dollars in millions)
Unrecognized tax benefits at beginning of period$813 876 
Decrease in tax positions of current year netted against deferred tax assets(50)(34)
Increase in tax positions of prior periods netted against deferred tax assets43 — 
Decrease in tax positions taken in the prior period— (2)
Increase in tax positions taken in the current period— 3 
Decreases related to divestitures of businesses(2)(30)
Decrease from the lapse of statute of limitations(5)— 
Unrecognized tax benefits at end of period$799 813 

As of December 31, 2023 the total amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $3 million. The unrecognized tax benefits also includes tax positions that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes, that would not impact the effective tax rate but could impact cash tax amounts payable to taxing authorities.

Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense. We had accrued interest (presented before related tax benefits) of approximately $1 million as of both December 31, 2023 and 2022.

We, or at least one of our affiliates, file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where net operating loss carry forwards are available.

Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may increase by up to $174 million within the next 12 months. The actual amount of such increase, if any, will depend on several future developments and events, many of which are outside our control.

In August 2022, the Inflation Reduction Act was signed into law and which, among other things, implemented a corporate alternative minimum tax (“CAMT”) on adjusted financial statement income effective for tax periods occurring after December 31, 2022. The CAMT had no material impact on our financial results as of December 31, 2023. In addition, the Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024. While the US has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation, some of which are effective for tax periods after December 31, 2023. While the global minimum tax will increase our administrative and compliance burdens, it is expected to have an immaterial impact to our financial statements.