INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

12. INCOME TAXES:

The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2022, 2021, and 2020 (in millions):

	2022		2021		2020
Current provision (benefit) for income taxes:
Federal	$	6	$	(78)	$	(126)
State	3		2		9
	9		(76)		(117)
Deferred provision (benefit) for income taxes:
Federal	868		(93)		(584)
State	36		(4)		(19)
	904		(97)		(603)
Provision (benefit) for income taxes	$	913	$	(173)	$	(720)

The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision:

	2022		2021		2020
Federal statutory rate	21.0	%	21.0	%	21.0	%
Adjustments:
State income taxes, net of federal tax benefit (a)	2.0	%	(4.2)	%	4.0	%
Valuation allowance (b)	1.6	%	(1.5)	%	(6.1)	%
Noncontrolling interest (c)	0.2	%	2.6	%	0.7	%
Federal tax credits (d)	(0.2)	%	10.6	%	1.7	%
Net Operating Loss Carryback (e)	—	%	7.5	%	1.9	%
Other	0.7	%	(1.3)	%	(0.3)	%
Effective income tax rate	25.3	%	34.7	%	22.9	%

(a)Included in state income taxes are deferred income tax effects related to certain acquisitions, intercompany mergers, tax elections, law changes and/or impact of changes in apportionment.

(b)Our 2022 income tax provision includes a net $56 million addition related to an increase in valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j) and primarily offset by a decrease in valuation allowance on certain state deferred tax assets resulting from the Deconsolidation. Our 2021 income tax provision includes a net $8 million addition related to an increase in valuation allowance associated with the federal interest expense carryforwards under the IRC Section 163(j) and primarily offset by a decrease in valuation allowance on certain state deferred tax assets as a result of the changes in estimate of the state apportionment. Our 2020 income tax provision includes a $192 million addition related to an increase in valuation allowance primarily due to the change in judgement in the realizability of certain deferred tax assets resulting from the reduction in forecast of future operating income and the RSN impairment.

(c)Our 2022, 2021, and 2020 income tax provisions include a $9 million expense and a $13 million and a $23 million benefit, respectively, related to noncontrolling interest of various partnerships.

(d)Our 2021 and 2020 income tax provisions include a benefit of $40 million and $42 million, respectively, related to investments in sustainability initiatives whose activities qualify for federal income tax credits through 2021.

(e)Our 2021 and 2020 income tax provisions include a benefit of $38 million and $61 million, respectively, as result of the CARES Act allowing for the 2020 federal net operating loss to be carried back to the pre-2018 years when the federal tax rate was 35%.

Temporary differences between the financial reporting carrying amounts and the tax bases of assets and liabilities give rise to deferred taxes. Total deferred tax assets and deferred tax liabilities as of December 31, 2022 and 2021 were as follows (in millions):

	2022		2021
Deferred Tax Assets:
Net operating losses:
Federal	$	14	$	16
State	131		120
Goodwill and intangible assets	2		6
Basis in DSH	—		704
DSH's interest expense carryforward	212		110
Investment in Bally's securities	70		28
Tax Credits	79		87
Other	96		80
	604		1,151
Valuation allowance for deferred tax assets	(312)		(256)
Total deferred tax assets	$	292	$	895
Deferred Tax Liabilities:
Goodwill and intangible assets	$	(384)	$	(397)
Property & equipment, net	(110)		(165)
Basis in DSH	(356)		—
Other	(52)		(40)
Total deferred tax liabilities	(902)		(602)
Net deferred tax (liabilities) assets	$	(610)	$	293

At December 31, 2022, the Company had approximately $68 million and $2.9 billion of gross federal and state net operating losses, respectively. Except for those without an expiration date, these losses will expire during various years from 2023 to 2042, and some of them are subject to annual limitations under the IRC Section 382 and similar state provisions. As discussed in Income Taxes under Note 1. Nature of Operations and Summary of Significant Accounting Policies, we establish valuation allowances in accordance with the guidance related to accounting for income taxes. As of December 31, 2022, a valuation allowance has been provided for deferred tax assets related to certain temporary basis differences, interest expense carryforwards under the IRC Section 163(j) and a substantial portion of our available state net operating loss carryforwards based on past operating results, expected timing of the reversals of existing temporary basis differences, alternative tax strategies, current and cumulative losses, and projected future taxable income. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that they will be realized in the future. During the year ended December 31, 2022, we increased our valuation allowance by $56 million to $312 million. The increase in valuation allowance was primarily due to uncertainty in the realizability of deferred tax assets related to interest expense carryforwards under the IRC Section 163(j), offset by a change in the realizability of certain state deferred tax assets. During the year ended December 31, 2021, we increased our valuation allowance by $4 million to $256 million. The increase in valuation allowance was primarily due to uncertainty in the realizability of deferred tax assets related to interest expense carryforwards under the IRC Section 163(j), offset by a change in the realizability of certain state deferred tax assets.

The following table summarizes the activity related to our accrued unrecognized tax benefits (in millions):

	2022		2021		2020
Balance at January 1,	$	15	$	11	$	11
Additions related to prior year tax positions	2		1		5
Additions related to current year tax positions	1		3		3
Reductions related to prior year tax positions	—		—		(1)
Reductions related to settlements with taxing authorities	—		—		(4)
Reductions related to expiration of the applicable statute of limitations	(1)		—		(3)
Balance at December 31,	$	17	$	15	$	11

We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Our 2014 through 2020 federal tax returns are currently under audit, and several of our subsidiaries are currently under state examinations for various years. We do not anticipate the resolution of these matters will result in a material change to our consolidated financial statements. In addition, we believe that our liability for unrecognized tax benefits could be reduced by up to $4 million, in the next twelve months, as a result of expected statute of limitations expirations and the resolution of examination issues and settlements with tax authorities.