Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Components of Income Tax Expense

Income tax expense consisted of the following for the years ended December 31, 2012 and 2011(in thousands):



	Years Ended December 31,
	2012			2011
Current
Federal	$	(22,418	)	$	18,721
Foreign	8,994			—
State	(4,197		)	6,952
Total current	(17,621		)	25,673
Deferred
Federal	(20,786		)	3,687
Foreign	(11,777		)	—
State	(3,891		)	(784		)
Total deferred	(36,454		)	2,903
Total tax provision	$	(54,075	)	$	28,576

Schedule of Income before Income Tax, Domestic and Foreign

The components of earnings before income taxes, by tax jurisdiction, were as follows for the years ended December 31, 2012, 2011 and 2010 (in thousands):



	Years Ended December 31,
	2012			2011		2010
United States	$	(161,129	)	$	141,801	$	(50,774	)
Foreign	(364,799		)	5,109		—
Total	$	(525,928	)	$	146,910	$	(50,774	)

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the statutory federal income tax rate of 35% to Molycorp’s effective income tax rate is as follows for the years ended December 31, 2012 and 2011 (in thousands):



	Years Ended December 31,
	2012			2011
Federal tax computed at the statutory rate	$	(184,075	)	$	51,419
State taxes, net of federal benefit	(5,970		)	5,255
Change in valuation allowance	19,515			(22,730		)
Impairment of goodwill and other long-lived assets	103,563			—
Acquisition costs	4,945			—
Changes related to uncertain tax positions	(14,176		)	—
Federal and State tax credits	(6,817		)	(2,627		)
Domestic production activities deduction	2,493			(2,493		)
Foreign income tax rate differential adjusted for U.S. taxation of foreign profits ⁽¹⁾	15,716			(1,735		)
Deferred charges	11,341			—
Other items, net	(610		)	1,487
Income tax expense	$	(54,075	)	$	28,576


(1)	The “U.S. Taxation of foreign profits” represents the U.S. tax net of foreign tax credits associated with actual and deemed repatriations of earnings from the Company's non-U.S. subsidiaries.

Schedule of Deferred Tax Assets and Liabilities

The tax effect of temporary differences and net operating losses, which give rise to deferred tax assets and liabilities, consisted of the following at December 31, 2012 and 2011 (in thousands):



	At December 31,
	2012			2011
Deferred tax assets:
Current:
Inventory	$	11,951		$	—
Other	2,468			806
Total current	14,419			806
Non-current:
Asset retirement obligation	165			419
Mineral resources	16,780			16,975
Intangible assets	13,435			—
Stock compensation	1,724			835
Net operating losses	56,156			852
Research and energy tax credits	10,473			—
Alternative Minimum Tax Credit	1,611			—
Other	823			116
Total non-current	101,167			19,197
Deferred tax liabilities:
Current
Inventory	3,395			1,849
Other	541			313
Total current	3,936			2,162
Non-current:
Development costs	—			217
Foreign subsidiary earnings and withholding taxes	32,637			—
Property, plant and equipment and intangible assets	137,010			3,647
Section 174 costs	24,814			20,094
Convertible debt (Notes)	40,478			14,138
Other	6,966			—
Total non-current	241,905			38,096
Net deferred taxes, before valuation allowance	(130,255		)	(20,255		)
Valuation allowance	(20,631		)	—
Total deferred tax	$	(150,886	)	$	(20,255	)

Schedule of Income Tax Contingencies

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):



	Years Ended December 31,
	2012			2011
Balance, beginning of year	$	519		$	—
Tax position related to current year:
Additions	4,737			519
Tax positions related to prior years:
Additions	16,109			—
Settlements	(13,740		)	—
Statute of limitations closures	(1,406		)	—
Balance, end of year	$	6,219		$	519

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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