Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

NOTE 12.    Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. U.S. income taxes have not been provided on the undistributed earnings of foreign subsidiaries and affiliates that GATX intends to permanently reinvest in foreign operations. The cumulative amount of such earnings was $505.7 million at December 31, 2011.

Significant components of GATX’s deferred tax liabilities and assets as of December 31 were (in millions):

	2011			2010
Deferred Tax Liabilities
Book/tax basis difference due to depreciation	$	756.2		$	704.4
Leveraged leases		62.7			61.8
Investments in affiliated companies		82.4			84.1
Lease accounting (other than leveraged)		13.7			13.9
Other		2.9			1.7
Total deferred tax liabilities		917.9			865.9
Deferred Tax Assets
Alternative minimum tax credit		8.9			11.5
Federal net operating loss		38.1			14.8
Foreign tax credit		13.9			16.9
Valuation on foreign tax credit		(13.9	)		(16.9	)
State net operating loss		31.1			28.2
Valuation on state net operating loss		(15.8	)		(15.8	)
Foreign net operating loss		7.3			4.7
Accruals not currently deductible for tax purposes		21.8			20.9
Allowance for losses		5.4			3.9
Pension and post-retirement benefits		40.7			31.4
Other		14.5			15.7
Total deferred tax assets		152.0			115.3
Net deferred tax liabilities	$	765.9		$	750.6

At December 31, 2011, GATX had a gross U.S. federal tax net operating loss carryforward of $108.8 million, of which $42.3 million expires after 2030 and $66.5 million expires after 2031. GATX also had an alternative minimum tax credit of $8.9 million that has an unlimited carryforward period.

At December 31, 2011, GATX had foreign tax credits of $13.9 million that are scheduled to expire beginning in 2012. A $13.9 million valuation allowance has been recorded as the Company believes it is more likely than not that it will be unable to utilize these credits. GATX also had state net operating losses of $31.1 million, net of federal benefit, that are scheduled to expire at various times beginning in 2012. A $15.8 million valuation allowance has been recorded as the Company believes it is more likely than not that it will be unable to utilize all of these losses. Additionally, GATX has a foreign tax net operating loss of $7.3 million that has an unlimited carryforward period. Utilization of future tax credits and net operating losses will be dependent on a number of variables, including the amount of taxable income, foreign source income attributes and state apportionment factors.

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

	2011			2010
Beginning balance	$	42.7		$	54.8
Additions to positions for prior years, including interest		—			2.6
Reductions due to resolution of audit issues		(21.9	)		(14.7	)
Ending balance	$	20.8		$	42.7

Subject to the completion of certain audits or the expiration of the applicable statute of limitations, the Company believes it is reasonably possible that, within the next 12 months, unrecognized domestic tax benefits of $15.5 million and unrecognized foreign tax benefits of $0.4 million may be recognized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. During the year ended December 31, 2011, the Company settled several federal open audit years resulting in the release of gross tax benefits totaling $21.9 million. No amounts have been accrued for penalties. To the extent interest is not assessed or otherwise reduced with respect to uncertain tax positions; any required adjustment will be recorded as a reduction of income tax expense.

If fully recognized, GATX’s gross liability for unrecognized tax benefits would decrease income tax expense by $20.8 million ($18.8 million net of federal tax benefits).

GATX files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. All federal examinations with respect to GATX’s U.S. tax returns for years prior to 2009 have been closed. The Company and its subsidiaries are undergoing audits in various state and foreign jurisdictions.

The components of income before income taxes for the years ending December 31 consisted of (in millions):

	2011		2010		2009
Domestic	$	56.7	$	25.0	$	35.4
Foreign		91.5		72.4		72.5
	$	148.2	$	97.4	$	107.9

GATX and its U.S. subsidiaries file a consolidated federal income tax return. Income taxes for the years ending December 31 consisted of (in millions):

	2011		2010			2009
Current
Domestic:
Federal	$	0.7	$	(0.2	)	$	(10.4	)
State and local		0.8		0.8			—
		1.5		0.6			(10.4	)
Foreign		5.0		5.0			12.9
		6.5		5.6			2.5
Deferred
Domestic:
Federal		14.8		3.9			12.3
State and local		0.9		0.8			1.9
		15.7		4.7			14.2
Foreign		15.2		6.3			9.8
		30.9		11.0			24.0
Income taxes	$	37.4	$	16.6		$	26.5

The reasons for the difference between GATX’s effective income tax rate and the federal statutory income tax rate for the years ending December 31 were ($ in millions):

	2011			2010			2009
Income taxes at federal statutory rate	$	51.9		$	34.1		$	37.8
Adjust for effect of:
Foreign tax credits		(0.1	)		—			(7.4	)
Foreign income tax rates		(8.5	)		(4.5	)		(1.4	)
Foreign income tax rate change		(4.1	)		(1.9	)		(1.4	)
Resolution of audit issues		(4.8	)		(9.5	)		—
Corporate owned life insurance		(0.2	)		(2.4	)		(0.8	)
State income taxes		1.1			0.1			1.2
Other		2.1			0.7			(1.5	)
Income taxes	$	37.4		$	16.6		$	26.5
Effective income tax rate		25.2	%		17.1	%		24.6	%

The 2011 effective income tax rate was impacted by a $4.1 million favorable tax adjustment resulting from a reduction in the statutory tax rates in the United Kingdom. Additionally, the effective income tax rate was impacted by $4.8 million of net tax benefits, which were attributed to the reversal of accruals associated with the close of a domestic tax audit. The 2010 effective income tax rate was impacted by the resolution of various foreign, federal, and state tax issues, and the favorable effect of a reduction in the statutory tax rates in the United Kingdom. The 2009 effective income tax rate was impacted by the recognition of foreign tax credit benefits, and the favorable effect of a reduction in the statutory tax rate in Canada. The adjustment for foreign income tax rates reflects the impact of lower tax rates on earnings from foreign subsidiaries and affiliates.

State income taxes are provided on domestic pre-tax income or loss. The effect of state income tax on the overall income tax rate is impacted by the amount of domestic income subject to state taxes relative to total worldwide income.