NOTE 12. INCOME TAXES

During the three months ended September 30, 2016, we recorded income tax expense of $10 million in continuing operations on pre-tax income of $89 million, compared to income tax expense of $11 million on pre-tax income of $40 million during the three months ended September 30, 2015. During the nine months ended September 30, 2016, we recorded income tax expense of $61 million in continuing operations on pre-tax income of $219 million, compared to no income tax expense on pre-tax income of $77 million during the nine months ended September 30, 2015. The reconciliation between the amount of recorded income tax expense (benefit) and the amount calculated at the statutory federal tax rate is shown below.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Tax expense at statutory federal rate of 35%	$	31	$	14	$	77	$	27
State income taxes, net of federal income tax benefit		3		4		10		11
Tax attributable to noncontrolling interests		(28)		(11)		(75)		(33)
Nondeductible goodwill		—		—		29		—
Nontaxable gains		(1)		—		(18)		—
Nondeductible litigation		4		—		37		—
Change in tax contingency reserves, including interest		(1)		—		(4)		1
Amendment of prior-year tax returns		—		—		—		(17)
Other items		2		4		5		11
	$	10	$	11	$	61	$	—

During the nine months ended September 30, 2016, we decreased our estimated liabilities for uncertain tax positions by $4 million, net of related deferred tax assets. The total amount of unrecognized tax benefits at September 30, 2016 was $37 million, of which $34 million, if recognized, would impact our effective tax rate and income tax expense (benefit) from continuing operations.

Our practice is to recognize interest and penalties related to income tax matters in income tax expense in our consolidated statements of operations. Total accrued interest and penalties on unrecognized tax benefits at September 30, 2016 were $5 million, all of which related to continuing operations.

At September 30, 2016, approximately $6 million of unrecognized federal and state tax benefits, as well as reserves for interest and penalties, may decrease in the next 12 months as a result of the settlement of audits, the filing of amended tax returns or the expiration of statutes of limitations.