Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

6.  Income Taxes

For periods prior to the Secondary Offering, CPE Inc. did not recognize any income taxes that Rio Tinto was subject to in connection with its noncontrolling interest in CPE Resources as it was generally a non-taxable entity.  Subsequent to the Secondary Offering, CPE Inc. recognizes income tax on 100% of the pre-tax income of CPE Resources.  Further, subsequent to the Secondary Offering, CPE Resources is no longer treated as a partnership for income tax purposes and must recognize income taxes on a stand-alone, separate return basis.

The following table summarizes income taxes (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Income tax (expense) benefit (CPE Inc.)	$	(52,162	)	$	(14,712	)	$	2,025		$	(30,212	)
Effective tax rate (CPE Inc.)	68.4		%	43.9		%	(1.4		)%	26.2		%
Income tax (expense) benefit (CPE Resources)	$	(45,276	)	$	1,266		$	(6,473	)	$	1,266
Effective tax rate (CPE Resources)	84.8		%	(2.4		)%	4.0		%	(0.9		)%

CPE Inc.

Our statutory income tax rate, including state income taxes is 36%.  The difference from that rate for both the three and nine months ended September 30, 2011 is due primarily to adjustments to the liability we expect to owe under the Tax Receivable Agreement and the corresponding change to the related deferred tax assets and changes in our valuation allowance resulting from the third quarter annual calculation of our estimate of future taxable income.

CPE Resources

Our statutory income tax rate, including state income taxes is 36%.  The difference from that rate for both the three and nine months ended September 30, 2011 is due primarily to changes in our valuation allowance resulting from the third quarter annual calculation of our estimate of future taxable income.  The effective tax rate for 2010 was also impacted by CPE Resources’s change in status from an entity generally not subject to income taxes prior to the Secondary Offering to an entity that must now recognize taxes on a stand-alone, separate return basis.