Income Taxes

We use the liability method to reflect income taxes on our financial statements. We recognize deferred tax assets and liabilities by applying enacted tax rates to the differences between the carrying value of existing assets and liabilities and their respective tax basis and to loss carryforwards. Tax credit carryforwards are recorded as deferred tax assets. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the change occurs. We assess the validity of deferred tax assets and loss and tax credit carryforwards and provide valuation allowances when we determine it is more likely than not that such assets, losses, or credits will not be realized. We have not recognized deferred taxes relative to foreign subsidiaries' earnings that are deemed to be permanently reinvested. Any related taxes associated with such earnings are not material.

Deferred tax liabilities (assets) were comprised of the following at December 31:



(in millions)	2012			2011
Depreciation	$	327.8		$	375.2
Deferred revenue	12.2			12.4
Intangibles	36.3			45.5
Gain on debt redemption	63.9			64.5
Other	54.8			46.6
Deferred tax liabilities	495.0			544.2
Claims and insurance	(179.6		)	(204.6		)
Net operating loss carryforwards	(298.8		)	(230.5		)
Employee benefit accruals	(288.9		)	(238.2		)
Other	(173.6		)	(207.4		)
Deferred tax assets	(940.9		)	(880.7		)
Valuation allowance	448.4			336.6
Net deferred tax assets	(492.5		)	(544.1		)
Net deferred tax liability	$	2.5		$	0.1

The net deferred tax liability of $2.5 million as of December 31, 2012 is included in “Other current and accrued liabilities” in the accompanying balance sheets. Current income tax receivable was $27.3 million and $9.6 million as of December 31, 2012 and 2011, respectively, and is included in “Prepaid expenses and other” in the accompanying balance sheets.

The Company has carried back the 2012 federal taxable loss to the extent allowed and claimed refunds of $16.5 million. As of December 31, 2012, the Company has remaining federal Net Operating Loss carryforwards of approximately $617.2 million, of which, an estimated $99.0 million will not be utilized due to limitations imposed by the Internal Revenue Code regarding the use of tax attributes following a deemed ownership change such as occurred in July, 2011. These carryforwards expire between 2030 and 2032 if not used. As of December 31, 2012, the Company has foreign tax credit carryforwards of approximately $15.3 million, none of which will be utilized due to the Internal Revenue Code limitations described above, and will expire between 2014 and 2018 if not used.

As of December 31, 2012 and 2011, valuation allowances of $448.4 million and $336.6 million have been established for certain deferred tax assets because, based on available sources of future taxable income, it is more likely than not that those assets will not be realized.

A reconciliation between income taxes at the federal statutory rate and the consolidated effective tax rate follows:



	2012		2011		2010
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net	(1.8	)%	(1.1	)%	3.8	%
Foreign tax rate differential	2.6	%	—	%	—	%
Permanent differences	8.6	%	(6.3	)%	—	%
Valuation allowance	(39.8	)%	(35.4	)%	(15.1	)%
Net (increase) decrease in unrecognized tax benefits	(1.7	)%	3.7	%	—	%
Benefit from settlement of Tax Court litigation	6.4	%	—	%	—	%
Other, net	0.6	%	6.2	%	0.3	%
Effective tax rate	9.9	%	2.1	%	24.0	%

The income tax provision (benefit) consisted of the following:



(in millions)	2012			2011			2010
Current:
Federal	$	(24.0	)	$	(23.9	)	$	3.1
State	2.5			11.3			(21.1		)
Foreign	2.7			5.3			1.6
Current income tax benefit	$	(18.8	)	$	(7.3	)	$	(16.4	)

Deferred:
Federal	$	5.5		$	(0.2	)	$	(76.4	)
State	0.5			—			(4.9		)
Foreign	(2.2		)	—			1.5
Deferred income tax provision (benefit)	$	3.8		$	(0.2	)	$	(79.8	)

Income tax benefit from continuing operations	$	(15.0	)	$	(7.5	)	$	(96.2	)

Based on the income (loss) before income taxes:
Domestic	$	(173.8	)	$	(366.1	)	$	(386.4	)
Foreign	22.3			4.2			(14.5		)
Loss before income taxes from continuing operations	$	(151.5	)	$	(361.9	)	$	(400.9	)

Uncertain Tax Positions

A rollforward of the total amount of unrecognized tax benefits for the years ended December 31 is as follows:



(in millions)		2012			2011
Unrecognized tax benefits at January 1		$	27.1		$	45.1

Increases related to:
	Tax positions taken during a prior period	3.6			1.2
	Tax positions taken during the current period	0.9			—

Decreases related to:
	Tax positions taken during a prior period	—			(15.7		)
	Lapse of applicable statute of limitations	(1.9		)	—
	Settlements with taxing authorities	—			(3.5		)

Unrecognized tax benefits at December 31		$	29.7		$	27.1

At December 31, 2012 and 2011, there are $25.8 million and $23.9 million of benefits that, if recognized, would affect the effective tax rate. We accrued interest of $2.2 million and $1.5 million for the years ended December 31, 2012 and 2011 and reversed $5.6 million of previously accrued interest on uncertain tax positions during the year ended December 31, 2012 for a net reduction of $3.4 million for 2012. The reversal related primarily to a favorable resolution of prior uncertain positions. The total amount of interest accrued for uncertain tax positions is $15.7 million and $19.1 million as of as of December 31, 2012 and 2011. During the year ended December 31, 2011, we paid tax of $3.3 million and interest of $2.2 million to settle an IRS audit of tax years 2002-04 for a consolidated group acquired in 2005 and reduced our previously recorded tax contingency accordingly. We have not accrued any penalties relative to uncertain tax positions. We have elected to treat interest and penalties on uncertain tax positions as interest expense and other operating expenses, respectively.

It is reasonably possible that the existing unrecognized tax benefits may decrease over the next twelve months by as much as $18.0 million as a result of developments in examinations and/or litigation, or from the expiration of statutes of limitation.

Tax years that remain subject to examination for our major tax jurisdictions as of December 31, 2012:



Statute remains open		2005-2011
Tax years currently under examination/exam completed		2005-2011
Tax years not examined		2012