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Income Taxes
9 Months Ended
Sep. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
We utilize our estimated annual effective tax rate to determine our provision for income taxes for interim periods. The income tax provision is computed by taking the estimated annual effective tax rate and multiplying it by the year-to-date pre-tax book income.
We recorded income tax expense of $1.2 million and $2.6 million for the three months ended September 30, 2013 and 2012, respectively. Our effective tax rate was 12.0% and 27.5% during the three months ended September 30, 2013 and 2012, respectively. The decrease in our effective tax rate was due primarily to a shift of income from higher tax rate jurisdictions to lower tax rate jurisdictions driven largely by a tax benefit on certain income earned in Hong Kong.
We recorded income tax expense of $4.1 million and $4.1 million for the nine months ended September 30, 2013 and 2012, respectively. Our effective tax rate was 19.0% and 22.9% during the nine months ended September 30, 2013 and 2012, respectively. The decrease in our effective tax rate was due primarily to a shift of income from higher tax rate jurisdictions to lower tax rate jurisdictions driven largely by a tax benefit on certain income earned in Hong Kong. Partially offsetting this benefit was the recording of approximately $0.4 million of additional tax reserves in the second quarter of 2013 resulting from a tax audit in Hong Kong for years preceding our acquisition of Enson Assets Limited and the reversal of $0.5 million of unrecognized tax benefits in 2012 which were originally recorded in 2007 through 2011.
On September 30, 2013, we had gross unrecognized tax benefits of approximately $3.4 million, including interest and penalties, of which approximately $2.9 million would affect the annual effective tax rate if these tax benefits are realized. Further, we are unaware of any positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase within the next twelve months. However, based on federal, state and foreign statute expirations in various jurisdictions, we anticipate a decrease in unrecognized tax benefits of approximately $0.1 million within the next twelve months.
We have elected to classify interest and penalties as a component of tax expense. Accrued interest and penalties of $0.1 million and $0.1 million on September 30, 2013 and December 31, 2012, respectively, are included in our unrecognized tax benefits.
We file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. On September 30, 2013, the open statutes of limitations in our significant tax jurisdictions were as follows: federal 2010 through 2012, state 2008 through 2012, and non-U.S. 2006 through 2012. On September 30, 2013, of our gross unrecognized tax benefits of $3.4 million, which included $0.1 million of interest and penalties, $1.5 million are classified as current and $1.9 million are classified as long term.