T » Topics » Income taxes

These excerpts taken from the T 10-K filed Feb 25, 2009.
Income Taxes  Our estimates of income taxes and the significant items giving rise to the deferred assets and liabilities are shown in Note 10 and reflect our assessment of actual future taxes to be paid on items reflected in the financial statements, giving consideration to both timing and probability of these estimates. Actual income taxes could vary from these estimates due to future changes in income tax law or the final review of our tax returns by federal, state or foreign tax authorities.

In 2007, we adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) and began accounting for uncertain tax positions under the provisions of FIN 48. As required by FIN 48, we use our judgment to determine whether it is more likely than not that we will sustain positions that we have taken on tax returns and, if so, the amount of benefit to initially recognize within our financial statements. We regularly review our uncertain tax positions and adjust our unrecognized tax benefits in light of changes in facts and circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law. These adjustments to our unrecognized tax benefits may affect our income tax expense. Settlement of uncertain tax positions may require use of our cash.

New Accounting Standards

Income Taxes  We adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) on January 1, 2007. With our adoption of FIN 48, we provide deferred income taxes for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of assets and liabilities computed pursuant to FIN 48. Under FIN 48, the tax bases of assets and liabilities are based on amounts that meet the FIN 48 recognition threshold and are measured pursuant to the measurement requirement in FIN 48. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for which the realization is uncertain. We review these items regularly in light of changes in federal and state tax laws and changes in our business.

Investment tax credits earned prior to their repeal by the Tax Reform Act of 1986 are amortized as reductions in income tax expense over the lives of the assets, which gave rise to the credits. Additionally, we report taxes imposed by governmental authorities on revenue-producing transactions between us and our customers in the income statement on a net basis.

This excerpt taken from the T 10-Q filed May 7, 2008.
Income taxes increased $310, or 19.1%, in the first quarter of 2008. The increase was primarily the result of higher income before income taxes in 2008. Our effective tax rate was 35.8% in the first quarter of 2008 and 36.3% for the same period in 2007. The decrease in our effective tax rate in 2008 was due to the recognition of state tax benefits and other adjustments.

This excerpt taken from the T 10-K filed Feb 27, 2008.
Income Taxes  As discussed previously in this footnote, we adopted FIN 48 on January 1, 2007. Prior to our adoption of FIN 48, we provided deferred income taxes for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. With our adoption of FIN 48, we provide deferred income taxes for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of assets and liabilities computed pursuant to FIN 48. Under FIN 48, the tax bases of assets and liabilities are based on amounts that meet the FIN 48 recognition threshold and are measured pursuant to the measurement requirement in FIN 48. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for which the realization is uncertain. We review these items regularly in light of changes in federal and state tax laws and changes in our business.

Investment tax credits earned prior to their repeal by the Tax Reform Act of 1986 are amortized as reductions in income tax expense over the lives of the assets, which gave rise to the credits. Additionally, we report taxes imposed by governmental authorities on revenue-producing transactions between us and our customers in the income statement on a net basis.

This excerpt taken from the T 10-Q filed May 4, 2007.
Income taxes increased $908 in the first quarter of 2007. The increase was primarily the result of higher operating income in 2007. Our effective tax rate was 36.3% in the first quarter of 2007 and 33.0% in the same period in 2006. The increase in our effective tax rate in 2007 was primarily due to the consolidation of AT&T Mobility and an increase in income before income taxes.

 

19

AT&T INC.

MARCH 31, 2007

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued

Dollars in millions except per share amounts

 

This excerpt taken from the T 10-K filed Feb 26, 2007.
Income Taxes Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain. Management reviews these items regularly in light of changes in tax laws and court rulings at both federal and state levels.

 

Our income tax returns are regularly audited and reviewed by the Internal Revenue Service (IRS) and state taxing authorities. The IRS has completed examinations for all tax years through 2002. In 2005, we reached a settlement with the IRS regarding almost all issues included in 1997-1999 claims. The 1997-1999 IRS settlement resulted in an income tax benefit that was recognized during 2005. During 2006 the IRS completed the field examination for the 2000-2002 periods. Settlement meetings with the IRS Appeals Division related to the disputed issues will begin during 2007. We do not expect a decision during 2007 from the IRS relating to the 2000-2002 disputed issues. The completion of the 2000-2002 examination is not expected to have an adverse impact on the financial statements. The IRS also began its field examination of our 2003-2005 federal tax returns during 2006. We do not expect the IRS to complete the field examination during 2007.

 

Additionally, during the first quarter of 2006, we received Joint Committee approval of the IRS audit for ATTC’s 1997-2001 federal income tax returns. The closing of this audit resulted in a reduction to goodwill and a corresponding reduction in our net deferred tax liability, as required by the purchase accounting rules, of approximately $385.

 

The IRS has completed field examinations for BellSouth’s tax years through 2001 and all years through 1998 are settled and closed. The IRS has issued assessments challenging the timing and amounts of various deductions for the 1999-2001 periods. Settlement discussions with the IRS Appeals Division regarding the 1999-2001 periods continue. Additionally, we anticipate that the IRS will complete its examination for the 2002-2003 periods during 2007 and we project that settlement meetings with the IRS Appeals Division will begin during 2007. The IRS’ field examination of BellSouth’s 2004-2005 federal tax returns began in 2006 and is not likely to be completed during 2007. We do not expect the resolution of these audits to have an adverse impact on the financial statements.

 

44

Notes to Consolidated Financial Statements, continued

Dollars in millions except per share amounts

 

The IRS has completed field examinations for all AT&T Mobility tax years through 2003. The IRS has issued assessments challenging the timing and amounts of various deductions for the 2002-2003 periods. We anticipate that we will begin settlement meetings with the IRS Appeals Division related to AT&T Mobility’s 2002-2003 disputed issues during 2007. The IRS’ field examination of AT&T Mobility’s 2004-2005 federal tax returns is expected to begin during 2007. We do not expect the resolution of these audits to have an adverse impact on the financial statements.

 

Investment tax credits earned prior to their repeal by the Tax Reform Act of 1986 are amortized as reductions in income tax expense over the lives of the assets, which gave rise to the credits.

 

This excerpt taken from the T 8-K filed Nov 17, 2006.
Income Taxes
 
The Company is not a taxable entity for federal income tax purposes. Rather, federal taxable income or loss is included in the Company’s respective members’ federal income tax returns. However, the Company’s provision for income taxes includes federal and state income taxes for certain of its corporate subsidiaries, as well as for certain states that impose income taxes upon non-corporate legal entities. After the acquisition, AT&T Wireless, now known as NCWS, contributed the majority of its assets and liabilities to Cingular Wireless II, LLC (CW II),
*  On November 18, 2005, SBC acquired AT&T Corp. and changed the name of the surviving entity to AT&T Inc. When used herein, “AT&T” will refer to the surviving entity. AT&T Corp. refers to that entity prior to November 18, 2005. In March 2006, AT&T and BellSouth agreed to merge. The transaction has been approved by the Board of Directors and shareholders of each company and reviewed by the U.S. Department of Justice. It is subject to approval by the FCC and satisfaction of normal closing conditions.


5

CINGULAR WIRELESS LLC
PART I — FINANCIAL INFORMATION (Dollars in Millions)
 
Item 1.   Financial Statements (Unaudited)
 
CINGULAR WIRELESS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

which it owns jointly with the Company. In exchange for the assets and liabilities contributed to CW II, NCWS received a 43% ownership interest in CW II, from which any income (loss) is allocated and which is subject to federal and state income taxes. The remaining income (loss) from CW II is allocated to the Company and flows through to the members who are taxed at their respective levels pursuant to federal and state income tax laws.
 
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, applying enacted statutory rates. The Company provides valuation allowances for deferred tax assets for which it does not consider realization to be more likely than not.
 
The Company’s effective tax rates vary from the expected federal statutory rate of 35% primarily from the exclusion from the Company’s income tax provision of operating results that are wholly allocated to its respective members’ federal income tax returns; these excluded results primarily consist of 57% of the CW II earnings and interest expense on our long-term member loans. The Company’s effective income tax rates for the three and nine months ended September 30, 2005 were 32.0% and 53.6%, respectively. The Company’s effective tax rates for the three and nine months ended September 30, 2006 were 20.9% and 22.0%, respectively. The effective tax rate for the nine months ended September 30, 2005 also reflects state income tax law changes and the reversal of previously established valuation allowances.
 
This excerpt taken from the T 10-Q filed Nov 2, 2006.
Income taxes increased $470, or 78.6%, in the third quarter and $1,171, or 78.2%, for the first nine months of 2006. The increase in income taxes in the third quarter and for the first nine months of 2006 was due to higher income before income taxes. Our effective tax rates were 33.0% in the third quarter and for the first nine months of 2006 compared to 32.4% in the third quarter and for the first nine months of 2005.

 

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