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10-K
GRAHAM HOLDINGS CO filed this Form 10-K on 02/23/2018
Entire Document
 


The Company has recorded at December 31, 2017, $35.3 million in deferred state income tax assets, net of U.S. Federal income tax, with respect to these state income tax loss carryforwards. The Company has established $33.3 million in valuation allowances against these deferred state income tax assets, since the Company has determined that it is more likely than not that the majority of state tax losses may not be fully utilized in the future to reduce state taxable income.
The Company has $13.5 million of U.S. Federal income tax loss carryforwards obtained as a result of prior stock acquisitions. U.S. Federal income tax loss carryforwards are expected to be fully utilized as follows:
(in millions)
 
2018
$
3.6

2019
3.3

2020
3.3

2021
1.1

2022
0.9

2023 and after
1.3

Total
$
13.5

The Company has established at December 31, 2017, $2.9 million in U.S. Federal deferred tax assets with respect to these U.S. Federal income tax loss carryforwards.
For U.S. Federal income tax purposes, the Company has $2.5 million of foreign tax credits available to be credited against future U.S. Federal income tax liabilities. If unutilized, $0.7 million of these foreign tax credits will expire in 2024, $0.7 million will expire in 2025, $0.7 million will expire in 2026, and $0.4 million will expire in 2027. The Company has established at December 31, 2017, $2.5 million of U.S. Federal deferred tax assets with respect to these U.S. Federal foreign tax credit carryforwards; however, due to changes to the rules relating to foreign tax credits under the Tax Act, a valuation allowance against these deferred tax assets was established during the fourth quarter of 2017 since the Company determined that it is more likely than not its foreign tax credit carryforwards may not be fully utilized in the future to reduce U.S. Federal income taxes.
The Company has $68.4 million of non-U.S. income tax loss carryforwards, as a result of operating losses and carryforwards obtained through prior stock acquisitions that are available to offset future non-U.S. taxable income and has recorded, with respect to these losses, $18.8 million in non-U.S. deferred income tax assets. The Company has established $5.6 million in valuation allowances against the deferred tax assets recorded for the portion of non-U.S. tax losses that may not be fully utilized to reduce future non-U.S. taxable income. The $68.4 million of non-U.S. income tax loss carryforwards consist of $57.4 million in losses that may be carried forward indefinitely; $7.0 million of losses that, if unutilized, will expire in varying amounts through 2022; and $3.9 million of losses that, if unutilized, will start to expire after 2022.
The Company has $7.8 million of non-U.S. capital loss carryforwards that may be carried forward indefinitely and are available to offset future non-U.S. capital gains. The Company recorded a $2.3 million non-U.S. deferred income tax asset for these non-U.S. capital loss carryforwards and has established a full valuation allowance against this non-U.S. deferred tax asset since the Company has determined that it is more likely than not that the capital loss carryforwards may not be fully utilized to reduce taxable income in the future.
Deferred tax valuation allowances and changes in deferred tax valuation allowances were as follows:
(in thousands)
Balance at Beginning of Period
 
Tax Expense and Revaluation
 
Deductions
 
Balance at End of Period
Year ended
 
 
 
 
 
 
 
December 31, 2017
$
41,319

 
$
7,423

 
$

 
$
48,742

December 31, 2016
$
69,545

 
$
4,709

 
$
(32,935
)
 
$
41,319

December 31, 2015
$
65,521

 
$
4,024

 
$

 
$
69,545

The Company has established $38.0 million in valuation allowances against deferred state tax assets recognized, net of U.S. Federal tax. As stated above, approximately $33.3 million of the valuation allowances, net of U.S. Federal income tax, relate to state income tax loss carryforwards. The Company has established valuation allowances against deferred state income tax assets, without considering potentially offsetting deferred tax liabilities established with respect to prepaid pension cost and goodwill for the state jurisdictions that do not conform to the U.S. indefinite carryforward period for losses generated after December 31, 2017. Prepaid pension cost and goodwill have not been considered a source of future taxable income for realizing those state deferred tax assets recognized since these temporary differences are not likely to reverse in the foreseeable future. The valuation allowances established against deferred state income tax assets may increase or decrease within the next 12 months, based on operating results or the market value of investment holdings. The Company will be monitoring

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