è

Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.6.0.2
Income Taxes
 12 Months Ended
Dec. 31, 2016
Income Taxes
Income Taxes

(11)Income Taxes

Income tax benefit (expense) consists of:

YearsendedDecember31,

2016

2015

2014

amountsinmillions

Current:

Federal

$
(39)

(17)

18

State and local

(29)

(17)

7

Foreign

—

(1)

—

(68)

(35)

25

Deferred:

Federal

(388)

(145)

(103)

State and local

(39)

(30)

12

Foreign

—

—

—

(427)

(175)

(91)

Income tax benefit (expense)

$
(495)

(210)

(66)

Income tax benefit (expense) differs from the amounts computed by applying the U.S. federal income tax rate of 35% as a result of the following:

YearsendedDecember31,

2016

2015

2014

amountsinmillions

Computed expected tax benefit (expense)

$
(497)

(160)

(161)

Liquidation of consolidated subsidiaries

—

—

107

Dividends received deductions

11

2

99

Taxable dividends not recognized for book purposes

(11)

—

—

Sale of subsidiary shares to subsidiary treated as a dividend for tax

—

—

(123)

State and local income taxes, net of federal income taxes

(46)

(1)

(4)

Federal tax credits

67

—

—

Change in valuation allowance affecting tax expense

(1)

(44)

(2)

Recognition of tax benefits not previously recognized, net

—

—

11

Other, net

(18)

(7)

7

Income tax benefit (expense)

$
(495)

(210)

(66)

For the year ended December 31, 2016 the significant reconciling item, as noted in the table above, is state income taxes offset with federal income tax credits claimed by SIRIUS XM related to research and development activities.

For the year ended December 31, 2015 the significant reconciling item, as noted in the table above, is a $44 million increase in the valuation allowance due to the effect of a tax law change in the District of Columbia (“D.C.”) which reduces the future allocation of SIRIUS XM’s taxable income in D.C. As a result, SIRIUS XM expects it will utilize less of its D.C. net operating losses in the future, resulting in a $44 million increase in the valuation allowance offsetting the deferred tax asset for these net operating losses.

For the year ended December 31, 2014 the significant reconciling items, as noted in the table above, are the result of taxes attributable to our sale of SIRIUS XM shares to SIRIUS XM, which is treated as a taxable distribution, but is not recognized for financial statement purposes. In addition, we recognized a benefit on our liquidation of a consolidated partnership investment and the related reduction in the tax basis of the partnership’s assets, which was not recognized for financial statement purposes and a dividends received deduction, primarily attributable to the taxable SIRIUS XM distribution during the year.

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:

December31,

2016

2015

amountsinmillions

Deferred tax assets:

Net operating and capital loss carryforwards and tax credits

$
1,381

1,795

Accrued stock compensation

136

140

Other accrued liabilities

102

76

Deferred revenue

761

729

Other future deductible amounts

20

7

Deferred tax assets

2,400

2,747

Valuation allowance

(50)

(49)

Net deferred tax assets

2,350

2,698

Deferred tax liabilities:

Investments

81

67

Fixed assets

330

313

Intangible assets

3,961

3,955

Discount on debt

3

30

Deferred tax liabilities

4,375

4,365

Net deferred tax liabilities

$
2,025

1,667

SIRIUS XM's deferred tax assets and liabilities are included in the amounts above although SIRIUS XM's deferred tax assets and liabilities are not offset with è's deferred tax assets and liabilities as SIRIUS XM is not included in the consolidated group tax return of è. è's acquisition of a controlling interest in SIRIUS XM's outstanding common stock during January 2013 did not cause a change in control under Section 382 of the Code.

The Company's net increase in the valuation allowance of $1 million in 2016 was recorded entirely to income tax expense.

At December31, 2016, the Company had federal and state net operating loss carryforwards for income tax purposes which, if not utilized to reduce taxable income in future periods, will expire on various dates through 2035. The Company's federal net operating loss carryforwards are primarily attributable to those at the SIRIUS XM level ($3.2 billion, $1.3 billion tax effected).

A reconciliation of unrecognized tax benefits is as follows:

December31,