2.2.0.7 false Income Taxes (Unaudited) 0207 - Disclosure - Income Taxes (Unaudited) true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Income Taxes [Abstract] 0 us-gaap_IncomeTaxExpenseBenefitAbstract us-gaap true na duration No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string No definition available. false 3 INCOME TAXES 1 us-gaap_IncomeTaxDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="margin-left: 0%"> <div style="margin-top: 12pt; font-size: 1pt">  </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent; text-align: left"> <tr> <td width="7%"></td> <td width="93%"></td> </tr> <tr valign="top"> <td> <b><font style="font-family: 'Times New Roman', Times">NOTE 7. </font></b> </td> <td> <b><font style="font-family: 'Times New Roman', Times">INCOME TAXES</font></b> </td> </tr> </table> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> We record our interim tax provision based upon our estimated annual effective tax rate and account for the tax effects of discrete events in the period in which they occur. We file a federal consolidated income tax return with our eligible subsidiaries. Our federal consolidated income tax return also includes the taxable results of certain grantor trusts described below. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> We currently estimate our annual effective tax rate for the year ended December 31, 2010 to be approximately 42.4%. The increase in the estimated annual effective tax rate for 2010 was primarily a result of the sunset of eligibility for production tax credits at some of our biomass facilities. We review the annual effective tax rate on a quarterly basis as projections are revised and laws are enacted. The effective income tax rate was 37.9% and 37.2% for the six months ended June 30, 2010 and 2009, respectively. The liability for uncertain tax positions, exclusive of interest and penalties, was $130.5 million and $131.2 million as of June 30, 2010 and December 31, 2009, respectively. Liabilities for uncertain tax positions decreased by approximately $0.6 million during the six months ended June 30, 2010. Included in the balance of unrecognized tax benefits as of June 30, 2010 are potential benefits of $116.7 million that, if recognized, would impact the effective tax rate. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> For the three months ended June 30, 2010 and 2009, we recognized $0 and an expense of $0.4 million, respectively, and for the six months ended June 30, 2010 and 2009, we recognized a benefit of $1.7 million and an expense of $0.4 million, respectively, of interest and penalties on uncertain tax positions. As of June 30, 2010 and December 31, 2009, we had accrued interest and penalties associated with liabilities for unrecognized tax positions of $6.7 million and $8.4 million, respectively. We continue to reflect interest accrued on uncertain tax positions and penalties as part of the tax provision. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> As issues are examined by the Internal Revenue Service and state auditors, we may decide to adjust the existing liability for uncertain tax positions for issues that were not deemed an exposure at the time we adopted accounting standards related to the accounting for uncertainty in income taxes. Accordingly, we will continue to monitor the results of audits and adjust the liability as needed. Federal income tax returns for Covanta Energy are closed for the years through 2005. However, to the extent net operating loss carryforwards (“NOLs”) are utilized from earlier years, federal income tax returns for Covanta Holding Corporation, formerly known as Danielson Holding Corporation, are still open. State income tax returns are generally subject to examination for a period of three to five years after the filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. We have various state income tax returns in the process of examination, administrative appeals or litigation. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> Our NOLs predominantly arose from our predecessor insurance entities (which were subsidiaries of our predecessor, which was formerly named Mission Insurance Group, Inc., “Mission”). These Mission insurance entities have been in state insolvency proceedings in California and Missouri since the late 1980’s. The amount of NOLs available to us will be reduced by any taxable income or increased by any taxable losses generated by current members of our consolidated tax group, which include grantor trusts associated with the Mission insurance entities. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> While we cannot predict with certainty what amounts, if any, may be includable in taxable income as a result of the final administration of these grantor trusts, substantial actions toward such final administration have been taken and we believe that neither arrangements with the California Commissioner nor the final administration by the Missouri Director will result in a material reduction in available NOLs. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> We had consolidated federal NOLs estimated to be approximately $545 million for federal income tax purposes as of December 31, 2009, based on the tax returns as filed. The federal NOLs will expire in various amounts from December 31, 2011 through December 31, 2028, if not used. Current forecasts indicate we will utilize consolidated federal NOLs in 2010 which will otherwise expire in 2011. In addition to the consolidated federal NOLs, as of December 31, 2009, we had state NOL carryforwards of approximately $264.7 million, which expire between 2011 and 2027, capital loss carryforwards of $0.2 million expiring in 2013, and additional federal credit carryforwards of $47.5 million. These deferred tax assets are offset by a valuation allowance of $20.5 million. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> In March 2010, U.S. Federal legislation enacted the Patient Protection and Affordable Care Act (“PPACA”) as well as a companion bill, the Health Care and Education Reconciliation Act of 2010 (“the Reconciliation Act”). As a result of enactment of the PPACA and the Reconciliation Act (collectively, the “Acts”), employers receiving the Medicare Part D subsidy will recognize a deferred tax charge for the reduction in deductibility of postretirement prescription drug coverage for eligible retirees. The resulting deferred tax charge from enactment of the Acts was recognized in the results for the six months ended June 30, 2010. This charge was not material to our condensed consolidated financial statements. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> For further information, refer to Note 16. Income Taxes of the Notes to the Consolidated Financial Statements in our <font style="white-space: nowrap">Form 10-K.</font> </div>  </div>   <div style="margin-left: 0%">  <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b> <font style="font-family: 'Times New Roman', Times"> </font> </b> </div> <div style="margin-top: 0pt; font-size: 1pt"> </div>  </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock Description containing the entire income tax disclosure. Examples include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. 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