Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
Income Tax Disclosure [Text Block]
Income Taxes

Income tax benefit (expense) consists of:

 
Years ended December 31,
 
2011
 
2010
 
2009
 
amounts in millions
Current:
 
 
 
 
 
Federal
$
(156
)
 
(85
)
 
(119
)
State and local
(32
)
 
6

 
(49
)
Foreign
(120
)
 
(111
)
 
(85
)
 
$
(308
)
 
(190
)
 
(253
)
Deferred:
 
 
 
 
 
Federal
$
(42
)
 
27

 
249

State and local
(6
)
 
21

 
46

Foreign
4

 
14

 
3

 
(44
)
 
62

 
298

Income tax benefit (expense)
$
(352
)
 
(128
)
 
45



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:

 
Years ended December 31,
 
2011
 
2010
 
2009
 
amounts in millions
Computed expected tax benefit (expense)
$
(329
)
 
(339
)
 
29

Nontaxable exchange of investments for subsidiary
—

 
112

 
—

State and local income taxes, net of federal income taxes
(22
)
 
18

 
(7
)
Foreign taxes, net of foreign tax credits
(3
)
 
48

 
(4
)
Change in valuation allowance affecting tax expense
(15
)
 
—

 
—

Nontaxable gains (losses) related to the Company's common stock
8

 
27

 
20

Other, net
9

 
6

 
7

Income tax benefit (expense)
$
(352
)
 
(128
)
 
45


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:

 
December 31,
 
2011
 
2010
 
amounts in millions
Deferred tax assets:
 
 
 
Net operating and capital loss carryforwards
$
70

 
40

Accrued stock compensation
44

 
33

Other accrued liabilities
69

 
154

Deferred revenue
5

 
9

Other future deductible amounts
144

 
92

Deferred tax assets
332

 
328

Valuation allowance
(16
)
 
(1
)
Net deferred tax assets
316

 
327

 
 
 
 
Deferred tax liabilities:
 
 
 
Investments
190

 
115

Intangible assets
1,661

 
1,718

Discount on exchangeable debentures
978

 
947

Deferred gain on debt retirements
321

 
313

Other
63

 
95

Deferred tax liabilities
3,213

 
3,188

Net deferred tax liabilities
$
2,897

 
2,861


The Company's deferred tax assets and liabilities are reported in the accompanying consolidated balance sheets as follows:

 
December 31,
 
2011
 
2010
 
amounts in millions
Current deferred tax liabilities
$
851

 
152

Long-term deferred tax liabilities
2,046

 
2,709

Net deferred tax liabilities
$
2,897

 
2,861



The Company's valuation allowance increased $15 million in 2011 all of which affected tax expense.

At December 31, 2011, Liberty had federal net operating and capital loss carryforwards for income tax purposes aggregating approximately $67 million which, if not utilized to reduce taxable income in future periods, $16 million will expire in 2013, $27 million will expire in 2016 and $24 million will expire after 2016. The foregoing net operating and capital loss carryforwards are subject to certain limitations and may not be currently utilized.
    
A reconciliation of unrecognized tax benefits is as follows:

 
Years ended December 31,
 
2011
 
2010
 
amounts in millions
Balance at beginning of year
$
123

 
160

Additions based on tax positions related to the current year
13

 
11

Additions for tax positions of prior years
3

 
3

Reductions for tax positions of prior years
(5
)
 
(23
)
Lapse of statute and settlements
(11
)
 
(28
)
Balance at end of year
$
123

 
123



As of December 31, 2011, the Company had recorded tax reserves of $123 million related to unrecognized tax benefits for uncertain tax positions. If such tax benefits were to be recognized for financial statement purposes, $71 million 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.

As of December 31, 2011, the Company's 2001 through 2007 tax years are closed for federal income tax purposes, and the IRS has completed its examination of the Company's 2008 through 2010 tax years. The Company's tax loss carryforwards from its 2008 through 2010 tax years are still subject to adjustment. The Company's 2011 tax year is 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. The Company is currently under audit in the UK and Germany. It is reasonably possible that the amount of the Company's gross unrecognized tax benefits may increase within the next twelve months by up to $6 million.

As of December 31, 2011, the Company had recorded $23 million of accrued interest and penalties related to uncertain tax positions.