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Liberty Interactive reviews tax bill impact on General Communication deal

Liberty Interactive Corp. reviewed the tax reform bill and its potential impact on the pending reorganization transactions with General Communication Inc., which will be renamed GCI Liberty Inc.

The most material potential impacts from the new tax reform legislation to the General Communication transactions result from new limitations on interest deductibility and a reduction in the corporate tax rate, the company said in an SEC filing.

At the closing of the pending General Communication transactions Liberty will contribute certain assets and liabilities of the Liberty Ventures Group to GCI Liberty and will reattribute the remaining assets and liabilities of the Liberty Ventures Group to the QVC Group. As a result of the changes in tax law under the tax reform bill, Liberty currently anticipates that the total amount of cash to be reattributed from the Liberty Ventures Group to the QVC Group will increase to about $1.3 billion from the previously disclosed amount of about $932 million.

The additional cash is primarily needed to offset the decrease in the fair value of tax attributes associated with the exchangeable debentures, which will be impacted both by new limitations on interest deductibility and the reduction in the corporate tax rate. Specifically, the value of future tax deductions of the exchangeable debentures will be lowered, which will be partially offset by a decrease in the deferred tax liability to about $900 million as of Dec. 31, 2017, from a previous balance of about $1.4 billion, according to a Form 8-K filed Dec. 26.

The company expects the increase in reattributed cash to be funded via a combination of Liberty Ventures Group cash on hand and GCI Liberty's Liberty Broadband Corp. Series C common stock margin loan.

In November, the Federal Communications Commission approved Liberty Interactive's planned deal to acquire General Communication.