Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Components of income tax expense (benefit)

The components of the income tax expense are as follows:


	Years Ended December 31,
	2023		2022	2021
	(Dollars in millions)
Federal
Current	$	(1)	—	—
Deferred	(9)		271	125
State and local
Current	8		21	12
Deferred	(11)		4	28
Foreign
Current	1		26	16
Deferred	10		(66)	16
Total income tax (benefit) expense	$	(2)	256	197

Schedule of income before income tax, domestic and foreign


	Years Ended December 31,
	2023		2022	2021
	(Dollars in millions)
Income tax (benefit) expense was allocated as follows:
Income tax (benefit) expense in the consolidated statements of operations:
Attributable to income	$	(2)	256	197
Member's equity:
Tax effect of the change in accumulated other comprehensive loss	$	3	(58)	(30)

Schedule of effective income tax rate reconciliation

The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:


	Years Ended December 31,
	2023		2022		2021
	(Percentage of pre-tax income)
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	0.3	%	(0.3)	%	4.1	%
Goodwill impairment	(19.4)	%	(21.4)	%	—	%

Divestiture of business(1)	(2.5)	%	(5.1)	%	—	%
Net foreign income tax	—	%	0.2	%	1.6	%

Research and development credits	0.1	%	0.1	%	(0.4)	%
Other, net	0.6	%	(0.1)	%	(1.1)	%
Effective income tax rate	0.1	%	(5.6)	%	25.2	%

_______________________________________________________________________________

(1)Includes Global Intangible Low-Taxes Income ("GILTI") incurred as a result of the sale of our Latin American business.

Deferred tax assets and liabilities

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:


	As of December 31,
	2023		2022
	(Dollars in millions)
Deferred tax assets
Deferred revenue	$	—	261
Net operating loss carry forwards	1,598		1,680
Property, plant and equipment	—		92
Other	575		448
Gross deferred tax assets	2,173		2,481
Less valuation allowance	(248)		(303)
Net deferred tax assets	1,925		2,178
Deferred tax liabilities
Deferred revenue	—		(5)
Property, plant and equipment	(1,189)		(1,142)
Intangible assets	(1,063)		(1,328)
Other	(9)		(58)
Gross deferred tax liabilities	(2,261)		(2,533)
Net deferred tax liabilities	$	(336)	(355)

Schedule of unrecognized tax benefits

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2023 and 2022 is as follows:


	2023		2022
	(Dollars in millions)
Unrecognized tax benefits at beginning of period	$	813	876
Decrease in tax positions of current year netted against deferred tax assets	(50)		(34)
Increase in tax positions of prior periods netted against deferred tax assets	43		—
Decrease in tax positions taken in the prior period	—		(2)
Increase in tax positions taken in the current period	—		3
Decreases related to divestitures of businesses	(2)		(30)
Decrease from the lapse of statute of limitations	(5)		—
Unrecognized tax benefits at end of period	$	799	813

Level 3 Parent, LLC 10-K