Income Taxes

The following table summarizes the components of income tax expense (benefit) from continuing operations for the years ended December 31, 2013, 2012 and 2011:



(Amounts in thousands)	Current			Deferred			Total
2013:
U.S. federal	$	—		$	39,077		$	39,077
Foreign	9,868			(1,123		)	8,745
State and local	2,818			(3,039		)	(221		)
Income tax expense	$	12,686		$	34,915		$	47,601
2012:
U.S. federal	$	—		$	(193,457	)	$	(193,457	)
Foreign	6,281			1,181			7,462
State and local	3,732			(1,891		)	1,841
Income tax expense (benefit)	$	10,013		$	(194,167	)	$	(184,154	)
2011:
U.S. federal	$	—		$	(13,063	)	$	(13,063	)
Foreign	6,716			(599		)	6,117
State and local	(80		)	(1,039		)	(1,119		)
Income tax expense (benefit)	$	6,636		$	(14,701	)	$	(8,065	)

Recorded income tax expense (benefit) allocated to income from continuing operations differed from amounts computed by applying the U.S. federal income tax rate of 35% to income before income taxes as a result of the following:



	Year Ended December 31,
(Amounts in thousands)	2013			2012			2011
Computed "expected" federal income tax expense	$	71,374		$	74,064		$	1,358
Change in valuation allowance	13,144			(246,469		)	(9,283		)
Effect of state and local income taxes, net of federal tax benefit	(144		)	1,196			685
Effect of noncontrolling interest income distribution	(13,412		)	(12,986		)	(12,532		)
Nondeductible compensation	2,265			805			11,654
Effect of foreign income taxes	(1,495		)	958			308
Effect of foreign earnings earned and remitted in the same year	195			1,446			—
Effect of foreign tax credits	(17,387		)	—			—
Reorganization items and fresh start accounting adjustments, net	—			759			859
Other, net	(6,939		)	(3,927		)	(1,114		)
Income tax expense (benefit)	$	47,601		$	(184,154	)	$	(8,065	)

In prior periods, a deduction was taken for foreign taxes paid to other jurisdictions. The Company has elected to amend the 2011 and 2012 tax returns to take a Foreign Tax Credit in lieu of that deduction. This resulted in a net increase to deferred tax assets.

In connection with emergence from Chapter 11, the Company's prepetition debt securities, primarily the prepetition notes issued by SFI and SFO, were extinguished. Absent an exception, a debtor recognizes cancellation of debt income ("CODI") upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code ("IRC") provides that a debtor in a bankruptcy case may exclude CODI from income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued. As a result of the market value of our equity upon emergence from Chapter 11 bankruptcy proceedings, we were able to retain a significant portion of our federal NOLs and state NOLs (collectively, the "Tax Attributes") after reduction of the Tax Attributes for CODI realized on emergence from Chapter 11. As a result of emergence from Chapter 11, the Company's NOLs were reduced by approximately $804.8 million of CODI.

Sections 382 and 383 of the IRC provide an annual limitation with respect to the ability of a corporation to utilize its Tax Attributes, as well as certain built-in-gains, against future U.S. taxable income in the event of a change in ownership. The Company's emergence from Chapter 11 is considered a change in ownership for purposes of Section 382 of the IRC. The limitation under the IRC is based on the value of the corporation as of the emergence date. The Company's estimated annual limitation of approximately $32.5 million is available for each of the next 18 years plus an additional estimated $696 million of built-in-gains which should become available to the Company from the period 2011 through 2015, on the amount of NOL carryforwards it may use in the future. Those limitation amounts accumulate for future use to the extent they are not utilized in a given year. As a result, our future U.S. taxable income may not be fully offset by the Tax Attributes if such income exceeds our annual limitation, and we may incur a tax liability with respect to such income. In addition, subsequent changes in ownership for purposes of the IRC could further diminish the Company's Tax Attributes.

Substantially all of our future taxable temporary differences (deferred tax liabilities) relate to the different financial accounting and tax depreciation methods and periods for property and equipment (20 to 25 years for financial reporting purposes and 7 to 12 years for tax reporting purposes) and intangibles. Our net operating loss carryforwards, alternative minimum tax credits, accrued insurance expenses and deferred compensation amounts represent future income tax benefits (deferred tax assets). The following table summarizes the components of deferred income tax assets and deferred tax liabilities as of December 31, 2013 and 2012:



	December 31,
(Amounts in thousands)	2013		2012
Deferred tax assets	$	544,466	$	561,216
Less: Valuation allowance	190,288		177,353
Net deferred tax assets	354,178		383,863
Deferred tax liabilities	428,247		411,447
Net deferred tax liability	$	74,069	$	27,584



	December 31,
(Amounts in thousands)	2013		2012
Deferred tax assets:
Federal net operating loss carryforwards	$	241,712	$	288,675
State net operating loss carryforwards	196,814		180,777
Foreign tax credits	17,387		—
Alternative minimum tax credits	6,591		6,591
Accrued insurance, pension liability and other	81,962		85,173
Total deferred tax assets	$	544,466	$	561,216

Deferred tax liabilities:
Property and equipment	$	299,633	$	287,992
Intangible assets and other	128,614		123,455
Total deferred tax liabilities	$	428,247	$	411,447

In addition to the net operating losses recognized under financial accounting principles and included in deferred income tax assets in the above table, as of December 31, 2013, we had approximately $144.3 million of income tax deductions related to share-based payments that are in excess of the amount recognized in the accompanying financial statements. When these benefits are realized in our tax returns as a reduction of taxes that otherwise would have been required to be paid in cash, then, in accordance with ASC 718, we will recognize these excess benefits as an increase in additional paid in capital on an after-tax basis, which at current income tax rates would approximate $56.6 million. We use tax law ordering when determining when excess tax benefits have been realized.

As of December 31, 2013 and 2012, we had approximately $0.8 billion and $0.9 billion, respectively, of net operating loss carryforwards available for U.S. federal income tax purposes that expire through 2029 and $5.0 billion and $4.7 billion, respectively, of net operating loss carryforwards available for state income tax purposes that expire through 2032. We have recorded a valuation allowance of $190.3 million and $177.4 million as of December 31, 2013 and 2012, respectively, due to uncertainties related to our ability to utilize some of our deferred tax assets before they expire. The valuation allowance at December 31, 2013 and December 31, 2012 was based on our inability to use state deferred tax assets related to NOLs that were generated in states where we no longer do business or where we have consistently not generated taxable income. As of December 31, 2013 and 2012, we had approximately $6.6 million of alternative minimum tax credits that have no expiration date.

The change in valuation allowance attributable to income from continuing operations, discontinued operations and other comprehensive loss and equity is presented below:



	Year Ended December 31,
(Amounts in thousands)	2013			2012			2011
Continuing operations	$	13,144		$	(246,469	)	$	(9,283	)
Discontinued operations	(209		)	(2,763		)	(457		)
Changes in other comprehensive loss and equity	—			—			16,226
Total change in valuation allowance	$	12,935		$	(249,232	)	$	6,486

Our unrecognized tax benefit as of December 31, 2013 and 2012 was $43.9 million. There were no additions or reductions to this unrecognized tax benefit during 2013.