Income Taxes



	Three Months Ended
	March 31,
	2012		2011
Effective income tax rate	(71	)%	23	%

The lower effective rate for the three months ended March 31, 2012 is primarily due to foreign tax credit carryforwards partially offset by deferred tax charges related to changes in assessment regarding permanent reinvestment of certain foreign earnings.

During the three months ended March 31, 2012, the Company determined that it was beneficial to amend certain prior year income tax returns to recognize the benefit of available foreign tax credit carryforwards. As a result, the Company recognized a tax benefit of $142 million. The available foreign tax credits are subject to a ten year carryforward period and begin to expire in 2014. The Company expects to fully utilize the credits within the prescribed carryforward period.

On February 15, 2012, the Company amended its existing joint venture and other related agreements with its venture partner in Polyplastics Co., Ltd (“Polyplastics”). The amended agreements (“Agreements”), among other items, modified certain dividend rights, resulting in a cash dividend payment to the Company of $72 million during the three months ended March 31, 2012. In addition, as a result of the Agreements, Polyplastics is required to pay certain annual dividends to the venture partners. Consequently, Polyplastics' undistributed earnings will no longer be invested indefinitely. Accordingly, the Company recognized a deferred tax liability of $38 million that was recorded to Income tax provision (benefit) in the unaudited interim consolidated statement of operations during the three months ended March 31, 2012, related to the taxable outside basis difference of its investment in Polyplastics.

Subsequent to the execution of the Agreements during the three months ended March 31, 2012, the Company recorded a further net increase of $5 million to the deferred tax liability related to its investment in Polyplastics, comprised of $9 million recorded to Income tax provision (benefit) in the unaudited interim consolidated statement of operations partially offset by $4 million recorded to Foreign currency translation in the unaudited interim consolidated statement of comprehensive income (loss).

Liabilities for uncertain tax positions and related interest and penalties are recorded in Uncertain tax positions and current Other liabilities in the unaudited consolidated balance sheets. For the three months ended March 31, 2012, the total unrecognized tax benefits, interest and penalties related to uncertain tax positions decreased by $15 million for interest and changes in uncertain tax positions in US and foreign jurisdictions, and increased $6 million due to exchange rate changes.

The Company's US tax returns for the years 2009 and 2010 are currently under audit by the US Internal Revenue Service and certain of the Company's subsidiaries are under audit in jurisdictions outside of the US. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a further change in the unrecognized tax benefits may occur within the next twelve months related to the settlement of any of these audits or the lapse of applicable statutes of limitations. Such amounts have been reflected as the current portion of uncertain tax positions (Note 7).