INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2011

The income tax expense on income from continuing operations for each of the three years in the period ended December 31, 2011 consisted of the following (in millions):

	2011			2010			2009
Current:
Federal	$	40		$	43		$	24
State and foreign		4			6			2
Current		44			49			26
Deferred:
Federal		(10	)		(3	)		(23	)
State and foreign		(2	)		(1	)		2
Deferred		(12	)		(4	)		(21	)
Total continuing operations tax expense	$	32		$	45		$	5

Income Tax Reconciliation

Income tax expense for 2011, 2010, and 2009 differs from amounts computed by applying the statutory federal rate to income from continuing operations before income taxes for the following reasons (in millions):

	2011		2010		2009

Computed federal income tax expense	$	30	$	40	$	4
State income taxes		2		5		4
Tax effect of HS&TC consolidation		--		--		(2	)
Other-net		--		--		(1	)
Income tax expense	$	32	$	45	$	5

Temporary Differences Affecting Deferred Tax Assets and Deferred Tax Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 of each year are as follows (in millions):

	2011		2010
Deferred tax assets:
Benefit plans	$	82	$	77
Insurance reserves		10		10
Capitalized development costs		16		14
Other		10		6
Total deferred tax assets		118		107

Deferred tax liabilities:
Basis differences for property and equipment		293		287
Tax-deferred gains on real estate transactions		213		216
Capital Construction Fund		3		3
Joint ventures and other investments		1		7
Other		21		17
Total deferred tax liabilities		531		530

Net deferred tax liability	$	413	$	423

Reconciliation of Unrecognized Tax Benefits

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

Balance at January 1, 2009	$	6
Additions for tax positions of prior years		--
Additions for tax positions of current year		3
Reductions for tax positions of prior years		--
Reductions for lapse of statute of limitations		(1	)
Balance at December 31, 2009		8
Additions for tax positions of prior years		--
Additions for tax positions of current year		2
Reductions for tax positions of prior years		(1	)
Reductions for lapse of statute of limitations		(1	)
Balance at December 31, 2010		8
Additions for tax positions of prior years		1
Additions for tax positions of current year		(1	)
Reductions for tax positions of prior years		--
Reductions for lapse of statute of limitations		(1	)
Balance at December 31, 2011	$	7

- 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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