TIME WARNER INC. | 2013 | FY | 3

Current and Deferred income taxes (tax benefits) provided on Income from continuing operations are as follows (millions):

   Year Ended December 31,
   2013 2012 2011
 Federal:       
  Current $ 617 $ 1,195 $ 922
  Deferred   808   (135)   171
 Foreign:         
  Current(a)   352   358   364
  Deferred   (27)   4   (52)
 State and Local:         
  Current   21   123   63
  Deferred   (22)   (19)   9
  Total(b) $ 1,749 $ 1,526 $ 1,477
 ____________         
           

(a)       Includes foreign withholding taxes of $274 million in 2013, $245 million in 2012 and $244 million in 2011.

(b)       Excludes excess tax benefits from equity awards allocated directly to contributed capital of $179 million in 2013, $83 million in 2012 and $22 million in 2011.

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Significant components of Time Warner's net deferred tax liabilities are as follows (millions):

   December 31,
   2013 2012
 Deferred tax assets:     
 Tax attribute carryforwards(a) $ 1,074 $ 835
 Receivable allowances and return reserves   239   244
 Royalties, participations and residuals   453   474
 Investments    181   170
 Equity-based compensation    243   280
 Amortization and depreciation   -   373
 Other   750   1,087
 Valuation allowances(a)   (564)   (560)
 Total deferred tax assets $ 2,376 $ 2,903
        
 Deferred tax liabilities:      
 Amortization and depreciation $ 45 $ -
 Assets acquired in business combinations   3,350   3,521
 Unbilled television receivables   941   915
 Unremitted earnings of foreign subsidiaries   235   120
 Total deferred tax liabilities   4,571   4,556
 Net deferred tax liability $ 2,195 $ 1,653
 _____________      

(a)       The Company has recorded valuation allowances for certain tax attribute carryforwards and other deferred tax assets due to uncertainty that exists regarding future realizability. The tax attribute carryforwards consist of $610 million of tax credits, $186 million of capital losses and $278 million of net operating losses that expire in varying amounts from 2014 through 2033. If, in the future, the Company believes that it is more likely than not that these deferred tax benefits will be realized, the majority of the valuation allowances will be recognized in the Consolidated Statement of Operations.

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The differences between income taxes expected at the U.S. federal statutory income tax rate of 35% and income taxes provided are as set forth below (millions):

   Year Ended December 31,
   2013 2012 2011
           
 Taxes on income at U.S. federal statutory rate $ 1,856 $ 1,557 $ 1,526
 State and local taxes, net of federal tax effects   92   65   71
 Domestic production activities deduction………………………………   (142)   (160)   (123)
 Other   (57)   64   3
 Total $ 1,749 $ 1,526 $ 1,477

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Domestic and foreign income before income taxes and discontinued operations are as follows (millions):

   Year Ended December 31,
   2013 2012 2011
           
 Domestic $ 5,157 $ 4,445 $ 4,285
 Foreign   146   3   74
 Total $ 5,303 $ 4,448 $ 4,359

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Changes in the Company's uncertain income tax positions, excluding the related accrual for interest and penalties, from January 1 through December 31 are set forth below (millions):

   Year Ended December 31,
   2013 2012 2011
           
 Beginning balance $ 2,222 $ 2,122 $ 2,100
 Additions for prior year tax positions   124   102   88
 Additions for current year tax positions   79   97   120
 Reductions for prior year tax positions   (144)   (61)   (153)
 Settlements   (84)   (26)   (15)
 Lapses in statute of limitations   (11)   (12)   (18)
 Ending balance $ 2,186 $ 2,222 $ 2,122

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