|12 Months Ended|
Dec. 31, 2018
(7) Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) bonus depreciation that will allow for full expensing of qualified property; (3) creating a new limitation on deductible interest expense; (4) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; (5) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2018; and (6) limitations on the deductibility of certain executive compensation. The SEC issued guidance on accounting for the tax effects of the Tax Act. The Company reflected the income tax effects of those aspects of the Tax Act for which the accounting was known as of December 31, 2017. As of December 31, 2018, the Company has completed its analysis of the Tax Act with no changes to the income tax effects presented at December 31, 2017.
Income tax benefit (expense) consists of:
Income tax benefit (expense) differs from the amounts computed by applying the applicable U.S. federal income tax rate of 21% in 2018 and 35% in 2017 and 2016 as a result of the following:
For the year ended December 31, 2018, the significant reconciling items, as noted in the table above, are the result of state income taxes, partially offset by unrealized gains attributable to the Company’s own stock which is not recognized for tax purposes.
For the year ended December 31, 2017, the significant reconciling items, as noted in the table above, are the result of the effect of the change in the U.S. federal corporate tax rate from 35% to 21% on deferred taxes and the effect of state income taxes. The Company recorded a discrete net tax benefit of $516 million in the period ending December 31, 2017. This net benefit primarily consisted of a net benefit for the corporate rate reduction.
For the year ended December 31, 2016, the significant reconciling items, as noted in the table above, are the result of the effect of state income taxes.
The tax effects of temporary differences and tax attributes that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:
The Company’s valuation allowance decreased $0.4 million in 2018, which affected tax expense during the year ended December 31, 2018.
At December 31, 2018, the Company had a deferred tax liability on investments of $1,020.9 million due to its share of earnings in its equity investment in Charter.
At December 31, 2018, Liberty Broadband had federal and state net operating losses, capital loss carryforwards, interest expense carryforwards and tax credit carryforwards for income tax purposes aggregating $56.1 million (on a tax effected basis). Of the $56.1 million, $6.7 million are carryforwards with no expiration. The remaining carryforwards expire at certain future dates. These carryforwards are expected to be utilized prior to expiration, except for $7.8 million which based on current projections, may expire unused and accordingly are subject to a valuation allowance. The carryforwards that are expected to be utilized will begin to expire in 2021.
As of December 31, 2018, the Company had not recorded tax reserves related to unrecognized tax benefits for uncertain tax positions.
As of December 31, 2018, the IRS has completed its examination of Liberty Broadband’s 2016 and 2017 tax years. Liberty Broadband’s 2018 tax year is being examined as part of the IRS’s Compliance Assurance Process “CAP” program. Because Liberty Broadband’s ownership of Charter is less than the required 80%, Charter is not consolidated with Liberty Broadband for federal income tax purposes.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef