Note 14. Income Taxes

The Company’s effective tax rate was (3.9)% and 13.6% for the three months ended September 30, 2012 and 2011, respectively. The decrease in the effective tax rate is primarily due to the recognition of tax benefits for acquisition and integration costs related to Alpine for the three months ended September 30, 2012 from the comparable period in 2011. The difference between the Company’s effective tax rate of (3.9)% as compared to the U.S. statutory federal income tax rate of 35.0% was primarily due to the aforementioned acquisition costs, the recognition of tax benefits resulting from income earned in certain tax holiday jurisdictions, foreign tax rate differentials, changes in unrecognized tax positions and tax credits, offset by the tax impact of permanent differences, adjustments of valuation allowances and foreign withholding taxes.

The Company’s effective tax rate was 11.8% for both the nine months ended September 30, 2012 and 2011. The difference between the Company’s effective tax rate of 11.8% as compared to the U.S. statutory federal income tax rate of 35.0% was primarily due to the recognition of tax benefits resulting from income earned in certain tax holiday jurisdictions, foreign tax rate differentials, changes in unrecognized tax positions and tax credits, offset by the tax impact of permanent differences, adjustments of valuation allowances and foreign withholding taxes.

The liability for unrecognized tax benefits is recorded as “Long-term income tax liabilities” in the accompanying Condensed Consolidated Balance Sheets. The Company has accrued $17.3 million at September 30, 2012, and $17.1 million at December 31, 2011, excluding penalties and interest. The $0.2 million increase results primarily from the expiration of the statutes of limitations for a foreign subsidiary, partially offset by fluctuations in foreign exchange rates.

Generally, earnings associated with the investments in the Company’s foreign subsidiaries are considered to be indefinitely invested outside of the U.S. Therefore, a U.S. provision for income taxes on those earnings or translation adjustments has not been recorded, as permitted by criterion outlined in ASC 740. Determination of any unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in nature is not practicable.

In addition, the U.S. Department of the Treasury released the “General Explanations of the Administration’s Fiscal Year 2013 Revenue Proposals” in February 2012. These proposals represent a significant shift in international tax policy, which may materially impact U.S. taxation of international earnings. The Company continues to monitor these proposals and is currently evaluating the potential impact on its financial condition, results of operations, and cash flows.

The Company is currently under audit in several tax jurisdictions. In April 2012, the Company received an assessment for the Canadian 2003-2006 audit for which the Company filed a Notice of Objection in July 2012. As required by the Notice of Objection process, the Company paid a mandatory security deposit in the amount of $14.2 million to the Canadian Revenue Agency and an additional deposit to the Province of Ontario in the amount of $0.4 million, which are included in “Deferred charges and other assets” in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2012 and “Cash paid during period for income taxes” in the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2012. This process will allow the Company to submit the case to the U.S. and Canada Competent Authority for ultimate resolution. Although the outcome of examinations by taxing authorities is always uncertain, the Company believes it is adequately reserved for these audits and that resolutions of them are not expected to have a material impact on its financial condition and results of operations. The significant tax jurisdictions currently under audit are as follows:


Tax Jurisdiction	Tax Year Ended
Canada		2003 to 2009
Philippines		2007 to 2010
United States		2010