|12 Months Ended|
Dec. 31, 2016
|Income Taxes [Abstract]|
(12) Income Taxes
Income tax benefit (expense) consists of:
The following table presents a summary of our domestic and foreign earnings from continuing operations before income taxes:
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:
Income tax expense was lower than the U.S. statutory tax rate of 35% in 2016 due to tax benefits derived from Liberty’s alternative energy tax credits and incentives. Income tax expense was lower than the U.S. statutory tax rate of 35% in 2015 due to the receipt of taxable dividends that are subject to a dividends received deduction. During 2014, Liberty changed its estimate of the effective state tax rate used to measure its net deferred tax liabilities, based on expected changes to the Company’s state apportionment factors. The change in 2014 was caused by the sale of a consolidated subsidiary (Provide) on December 31, 2014. In 2014, the rate change required an adjustment to the recognized deferred taxes at the corporate level. During 2015 and 2014, Liberty offset federal tax liabilities with tax credits derived from its alternative energy investments.
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:
The Company's valuation allowance increased $16 million in 2016. The entire change in valuation allowance affected tax expense.
At December 31, 2016, Liberty had net operating losses (on a tax effected basis) and foreign tax credit carryforwards for income tax purposes aggregating approximately $123 million and $134 million, respectively, which will begin to expire in 2017 and beyond if not utilized to reduce domestic, state or foreign income tax liabilities in future periods. These net operating losses and foreign tax credit carryforwards are expected to be utilized prior to expiration, except for $60 million of net operating losses. In addition, Liberty has $4 million of other deferred tax assets which may not ultimately be realized by the Company.
A reconciliation of unrecognized tax benefits is as follows:
As of December 31, 2016, 2015 and 2014, the Company had recorded tax reserves of $72 million, $104 million and $136 million, respectively, related to unrecognized tax benefits for uncertain tax positions. If such tax benefits were to be recognized for financial statement purposes, $50 million, $47 million and $68 million for the years ended December 31, 2016, 2015 and 2014, respectively, would be reflected in the Company's tax expense and affect its effective tax rate. Liberty's estimate of its unrecognized tax benefits related to uncertain tax positions requires a high degree of judgment. The Company has tax positions for which the amount of related unrecognized tax benefits could change during 2017. The amount of unrecognized tax benefits related to these issues could change as a result of potential settlements, lapsing of statute of limitations and revisions of estimates. It is reasonably possible that the amount of the Company's gross unrecognized tax benefits may decrease within the next twelve months by up to $6 million.
As of December 31, 2016, the Company's tax years prior to 2013 are closed for federal income tax purposes, and the IRS has completed its examination of the Company's 2013 and 2014 tax year. The Company's 2015 and 2016 tax years are being examined currently as part of the IRS's Compliance Assurance Process ("CAP") program. Various states are currently examining the Company's prior years state income tax returns. QVC is currently under audit in the U.K. and Germany. The Company agreed to an assessment related to an examination in Germany. The Company believes that amounts paid in connection with that assessment will be creditable against its U.S. federal income tax liability.
The Company recorded $17 million of accrued interest and penalties related to uncertain tax positions as of each of December 31, 2016 and 2015.
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://www.xbrl.org/2003/role/presentationRef