Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Reconciliation of the provision for income taxes computed at Federal statutory rates to the effective rates

The following is a reconciliation of the provision for income taxes computed at federal statutory rates to the effective rates for the years ended December 31, 2012, 2011 and 2010:

	2012	2011	2010
Consolidated tax provision at federal statutory rate	35.0%	35.0%	35.0%
State income tax provisions, net of federal income tax benefit	2.4	4.0	4.7
Tax reserve adjustment	(5.4)	(4.0)	(0.3)
Changes in certain deferred tax balances	3.1	(2.7)	(1.0)
Noncontrolling interest	(2.5)	(1.1)	(0.4)
Reversal of tax credits	-	4.4	-
Non-deductible transaction costs	-	-	4.2
All other, net	0.4	0.3	0.3
Effective tax rate	33.0 %	35.9 %	42.5 %

Components of Net Deferred Income Tax Liability (Asset)

The components of the net deferred income tax liability (asset) at December 31 are as follows:

($ in thousands)	2012			2011

Deferred income tax liabilities:
Property, plant and equipment basis differences	$	1,959,028		$	1,896,666
Intangibles		929,749			997,455
Other, net		29,564			17,584
		2,918,341			2,911,705

Deferred income tax assets:
Pension liability		306,421			246,714
Tax operating loss carryforward		154,892			294,171
Employee benefits		177,464			154,711
State tax liability		7,422			7,358
Accrued expenses		43,162			27,645
Allowance for doubtful accounts		35,181			42,733
Other, net		14,025			22,313
		738,567			795,645
Less: Valuation allowance		(78,784	)		(108,662	)
Net deferred income tax asset		659,783			686,983
Net deferred income tax liability	$	2,258,558		$	2,224,722


Deferred tax assets and liabilities are reflected in the following
captions on the consolidated balance sheet:
Deferred income taxes	$	2,357,210		$	2,458,018
Income taxes and other current assets		(98,652	)		(233,296	)
Net deferred income tax liability	$	2,258,558		$	2,224,722

Provision (Benefit) for Income Taxes

The provision (benefit) for federal and state income taxes, as well as the taxes charged or credited to shareholders' equity of Frontier, includes amounts both payable currently and deferred for payment in future periods as indicated below:

($ in thousands)	2012			2011			2010

Income taxes charged to the consolidated statement of
operations:
Current:
Federal	$	(3,824	)	$	(13,320	)	$	18,302
State		(1,039	)		14,252			10,260
Total current		(4,863	)		932			28,562

Deferred:
Federal		53,642			77,750			82,080
State		26,859			9,661			4,357
Total deferred		80,501			87,411			86,437
Total income taxes charged to the consolidated statement of		75,638			88,343			114,999
operations

Income taxes charged (credited) to shareholders' equity of Frontier:
Current benefit arising from stock options exercised and restricted stock		2,937			-			-
Deferred income taxes (benefits) arising from the recognition of
additional pension/OPEB liability		(58,551	)		(97,409	)		17,501
Total income taxes charged (credited) to shareholders' equity of Frontier		(55,614	)		(97,409	)		17,501

Total income taxes	$	20,024		$	(9,066	)	$	132,500

Changes in the Balance of Unrecognized Tax Benefits

The following table sets forth the changes in the Company's balance of unrecognized tax benefits for the years ended December 31, 2012 and 2011:

($ in thousands)
	2012			2011
Unrecognized tax benefits - beginning of year	$	33,928		$	49,180
Gross increases - current year tax positions		3,381			8,200
Gross decreases - expired statute of limitations		(25,822	)		(23,452	)
Unrecognized tax benefits - end of year	$	11,487		$	33,928