Income Taxes (Unaudited)

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

2.  Income Taxes

During the second quarter of 2011, the Internal Revenue Service (IRS) completed its examination of NS' 2008 tax return and review of certain claims for refund for prior years that resulted in a decrease in income tax expense of $40 million. Also during the second quarter, three states enacted tax law changes that, as required by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, "Income Taxes," decreased deferred income tax expense by $19 million.

NS' balance of unrecognized tax benefits reported at December 31, 2010 has decreased by $74 million, primarily because of the timing of deductibility of a tax position that became certain during the first quarter; the completion of the IRS examination and review of certain claims for refund during the second quarter; and the resolution of certain state tax matters during the third quarter.  These decreases during the first nine months were offset by additions to prior year unrecognized tax benefits for new information during the third quarter.  NS' consolidated income tax returns for 2009 and 2010 are undergoing routine audit by the IRS.

During the first quarter of 2010, the Patient Protection and Affordable Care Act, and the Health Care and Education Reconciliation Act of 2010 were signed into law.  Provisions of the Acts eliminated, after 2012, the tax deduction available for reimbursed prescription drug expenses under the Medicare Part D retiree drug subsidy program.  As required by ASC 740, NS recorded a $27 million charge to deferred tax expense in the first quarter of 2010.