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Income Taxes
3 Months Ended
Mar. 31, 2012
Income Taxes [Abstract]  
Income Taxes

Note 8 – Income Taxes

The Company's effective income tax rate (income tax expense as a percentage of income before income taxes) was 39.7% for the three months ended March 31, 2012 and 35.0% for the same period of the prior year. The differences between the U.S. federal statutory rate of 35% and the effective rates were primarily attributable to losses in foreign jurisdictions for which no tax benefit was provided, and the impact of state taxes.

In connection with the Separation, the Company and TFAC entered into a Tax Sharing Agreement, dated June 1, 2010 (the "Tax Sharing Agreement"), which governs the Company's and CoreLogic's respective rights, responsibilities and obligations for certain tax related matters. At March 31, 2012 and December 31, 2011 the Company had a payable to CoreLogic of $2.5 million related to these matters which is included in due to CoreLogic, net on the Company's condensed consolidated balance sheets.

At March 31, 2012 and December 31, 2011, the Company had a net payable to CoreLogic of $41.3 million and $35.4 million, respectively, related to tax matters prior to the Separation. This amount is included in the Company's condensed consolidated balance sheet in due to CoreLogic, net.

The Company evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the Company's forecast of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets. Failure to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company's effective tax rate on future earnings.

During the current quarter, the Company released a valuation allowance of $5.3 million previously recorded against certain of its deferred tax assets. Specifically, management determined that it is more likely than not that all its tax capital loss items will be realized prior to expiration as the result of favorable market value activity in its equity securities portfolio during the current quarter. Application of the accounting guidance related to intraperiod tax allocations resulted in the valuation allowance being released to other comprehensive income and tax expense, in the amounts of $4.5 million and $0.8 million, respectively.

The Company continues to monitor the realizability of recognized losses, impairment losses, and unrecognized losses, for which there is no associated valuation allowance, recorded through March 31, 2012. The Company believes it is more likely than not that the tax benefits associated with those losses will be realized. However, this determination is a judgment and could be impacted by further market fluctuations, among other factors.

As of March 31, 2012 and December 31, 2011, the liability for income taxes associated with uncertain tax positions was $51.1 million and $17.3 million, respectively. The increase in the liability as of March 31, 2012 was primarily attributable to the Company's claim for a timing adjustment in a prior-year tax return. The liabilities could be reduced by $35.9 million and $2.9 million, respectively, of offsetting tax benefits associated with the correlative effects of potential adjustments including timing adjustments and state income taxes. The net amounts of $15.2 million and $14.4 million, respectively, if recognized, would favorably affect the Company's effective tax rate.

 

The Company's continuing practice is to recognize interest and penalties, if any, related to uncertain tax positions in tax expense. As of March 31, 2012 and December 31, 2011, the Company had accrued $3.8 million and $3.6 million, respectively, of interest and penalties (net of tax benefits) related to uncertain tax positions.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions may significantly increase or decrease within the next 12 months. These changes may be the result of items such as ongoing audits or the expiration of federal and state statute of limitations for the assessment of taxes. The Company estimates that there will be no increase or decrease in unrecognized tax benefits within the next 12 months.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various non-U.S. jurisdictions. The primary non-federal jurisdictions are California, Oregon, Michigan, Texas, Canada, and the United Kingdom. The Company is no longer subject to U.S. federal, state, and non-U.S. income tax examinations by taxing authorities for years prior to 2005.