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Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The provision (benefit) for income taxes for the years ended December 31, 2012, 2011 and 2010 was as follows:
 
Year Ended December 31,
 
2012
 
2011
 
2010
 
(In millions)
Provision (benefit) for income taxes:
 
 
 
 
 
Current
 
 
 
 
 
Federal
$
77.4

 
$
13.2

 
$
6.2

State and foreign
3.7

 
2.8

 
(0.6
)
 
81.1

 
16.0

 
5.6

Deferred
 
 
 
 
 
Federal
(12.2
)
 
11.4

 
(12.8
)
State
(1.7
)
 
2.4

 
(2.1
)
 
(13.9
)
 
13.8

 
(14.9
)
Provision (benefit) for income taxes
$
67.2

 
$
29.8

 
$
(9.3
)

The provision (benefit) for income taxes differs from the expected federal income tax rates as follows:
 
2012
 
2011
 
2010
Statutory federal income tax rate
35.0
 %
 
35.0
 %
 
(35.0
)%
State and other taxes, net of federal tax benefit
2.8

 
3.7

 
(0.4
)
Change in unrecognized tax benefits
(0.2
)
 
(4.0
)
 
(28.1
)
Change in valuation allowance
0.7

 
1.7

 
(1.5
)
State adjustments including audits and settlements
0.2

 
0.2

 
(0.6
)
Compensation related tax credits, net of deduction offsets
(0.9
)
 
(4.9
)
 
(46.0
)
Changes in tax rates and state tax laws
(3.2
)
 
(3.9
)
 
—

Kansas High Performance Incentive Program credits
—

 
0.5

 
—

Goodwill intangibles adjustment
—

 
—

 
27.0

Non-deductible preferred stock issuance costs
—

 
—

 
8.5

Other
0.1

 
0.1

 
(0.8
)
Effective tax rate
34.5
 %
 
28.4
 %
 
(76.9
)%

Net deferred tax assets (liabilities) consisted of the following components:
 
2012
 
2011
 
(In millions)
Differences in capitalization and depreciation and amortization of reacquired franchises and equipment
$
4.9

 
$
4.9

Differences in acquisition financing costs
1.8

 
1.9

Employee compensation
15.2

 
14.2

Deferred gain on sale of assets
5.9

 
2.0

Book/tax difference in revenue recognition
22.2

 
18.1

Other
35.4

 
35.9

Deferred tax assets
85.4

 
77.0

Valuation allowance
(4.1
)
 
(2.9
)
Total deferred tax assets after valuation allowance
81.3

 
74.1

Differences between financial and tax accounting in the recognition of franchise and equipment sales
(55.1
)
 
(59.4
)
Differences in capitalization and depreciation (1)
(310.2
)
 
(322.2
)
Differences in acquisition financing costs
(7.7
)
 
(9.3
)
Book/tax difference in revenue recognition
(19.5
)
 
(19.8
)
Differences between book and tax basis of property and equipment
(9.8
)
 
(9.8
)
Other
(19.4
)
 
(16.8
)
Deferred tax liabilities
(421.7
)
 
(437.3
)
Net deferred tax liabilities
$
(340.4
)
 
$
(363.2
)
Net deferred tax asset—current
$
22.3

 
$
21.0

Valuation allowance—current
(0.5
)
 
(0.4
)
Net deferred tax asset—current
21.8

 
20.6

Deferred tax liability—non-current
(358.6
)
 
(381.3
)
Valuation allowance—non-current
(3.6
)
 
(2.5
)
Net deferred tax liability—non-current
(362.2
)
 
(383.8
)
Net deferred tax liabilities
$
(340.4
)
 
$
(363.2
)
_____________________________________
(1) 
Primarily related to the Applebee's acquisition.
The Company files federal income tax returns and the Company or one of its subsidiaries files income tax returns in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state or non-United States tax examinations by tax authorities for years before 2008. The Internal Revenue Service commenced examination of the Company's U.S. federal income tax return for the tax years 2008 to 2010 in the first quarter of 2012. The examination is anticipated to be completed by the first quarter of 2013.

The total gross unrecognized tax benefit as of December 31, 2012 and 2011 was $6.7 million and $8.2 million, respectively, excluding interest, penalties and related income tax benefits. The decrease of $1.5 million is primarily related to expiration of statute of limitation with various taxing authorities. The entire $6.7 million will be included in the Company's effective income tax rate if recognized.

The Company estimates the unrecognized tax benefits may decrease over the upcoming 12 months by an amount up to $3.3 million related to settlements with taxing authorities and the lapse of the statute of limitations. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
(In millions)
Unrecognized tax benefit as of December 31, 2010
$
12.8

Change as a result of prior year tax positions
(3.3
)
Decreases relating to settlements with taxing authorities
(0.8
)
Decreases as a result of a lapse of the statute of limitations
(0.5
)
Unrecognized tax benefit as of December 31, 2011
8.2

Change as a result of prior year tax positions
0.8

Change as a result of current year tax positions
0.2

Decreases relating to settlements with taxing authorities
(0.9
)
Decreases as a result of a lapse of the statute of limitations
(1.6
)
Unrecognized tax benefit as of December 31, 2012
$
6.7


As of December 31, 2012, the accrued interest and penalties were $1.4 million and $0.2 million, respectively, excluding any related income tax benefits. As of December 31, 2011, the accrued interest and penalties were $3.0 million and $0.3 million, respectively, excluding any related income tax benefits. The decrease of $1.6 million of accrued interest is primarily related to the decrease of unrecognized tax benefits due to settlements with taxing authorities, partially offset by the accrual of interest during the twelve months ended December 31, 2012. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of income tax expense which is recognized in the Consolidated Statements of Operations.
The Company has various state net operating loss carryovers representing $5.0 million of state taxes. The net operating loss carryovers will expire, if unused, during the period from 2013 through 2031.

For the years ended December 31, 2012 and 2011, the Company had a total valuation allowance in the amounts of $4.1 million and $2.9 million, respectively. The entire $4.1 million in 2012 is related to various state net operating loss carryovers for DineEquity, Inc. and International House of Pancakes, LLC and Subsidiaries.