Income Taxes

We use the asset and liability method to reflect income taxes on our financial statements, pursuant to ASC 740, "Income Taxes" ("ASC 740"). 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)	2013			2012
Depreciation	$	295.2		$	327.8
Deferred revenue	17.2			12.2
Intangibles	29.5			36.3
Gain on debt redemption	64.3			63.9
Other	54.7			54.7
Deferred tax liabilities	460.9			494.9
Claims and insurance	(169.2		)	(179.6		)
Net operating loss carryforwards	(329.1		)	(298.8		)
Employee benefit accruals	(237.9		)	(288.9		)
Other	(176.7		)	(173.6		)
Deferred tax assets	(912.9		)	(940.9		)
Valuation allowance	454.1			448.4
Net deferred tax assets	(458.8		)	(492.5		)
Net deferred tax liability	$	2.1		$	2.4

The net deferred tax liability of $2.1 million and $2.4 million as of December 31, 2013 and 2012, respectively, is included as separate line items in the accompanying balance sheets. Current income tax receivable was $20.1 million and $27.3 million as of December 31, 2013 and 2012, respectively, and is included in “Prepaid expenses and other” in the accompanying balance sheets.

The Company has carried back the 2013 federal taxable loss to the extent allowed and claimed and received refunds of $14.4 million. As of December 31, 2013, the Company has remaining federal Net Operating Loss carryforwards of approximately $689.1 million, of which, an estimated $298.6 million will not be utilized due to limitations imposed by the Internal Revenue Code regarding the use of tax attributes following deemed ownership changes that occurred in July, 2011 and in July, 2013. Subsequent to the balance sheet date, another such ownership change occurred in January, 2014, in conjunction with the 2014 Financing Transactions described in the "2014 Financing Transactions" footnote. The impact of the 2014 ownership change on the Company’s ability to utilize its Net Operating Loss carryforwards has not yet been determined, but it is not expected to be material. These carryforwards expire between 2028 and 2033 if not used. As of December 31, 2013, the Company has foreign tax credit and other credit carryforwards of approximately $16.9 million, none of which will likely be utilized due to the Internal Revenue Code limitations described above, and which will expire between 2014 and 2018 if not used.

As of December 31, 2013 and 2012, a valuation allowance of $454.1 million and $448.4 million has been established for 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:



	2013		2012		2011
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net	(2.4	)%	(1.8	)%	(1.1	)%
Foreign tax rate differential	(0.1	)%	2.6	%	—	%
Permanent differences	2.0	%	8.6	%	(6.3	)%
Valuation allowance	(31.9	)%	(39.8	)%	(35.4	)%
Benefit from intraperiod tax allocation under ASC 740	32.2	%	—	%	—	%
Net (increase) decrease in unrecognized tax benefits	0.6	%	(1.7	)%	3.7	%
Benefit from settlement of Tax Court litigation	—	%	6.4	%	—	%
Other, net	—	%	0.6	%	6.2	%
Effective tax rate	35.4	%	9.9	%	2.1	%

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



(in millions)	2013			2012			2011
Current:
Federal	$	(14.5	)	$	(24.0	)	$	(23.9	)
State	1.4			2.5			11.3
Foreign	9.6			2.7			5.3
Current income tax benefit	$	(3.5	)	$	(18.8	)	$	(7.3	)

Deferred:
Federal	$	(41.7	)	$	5.5		$	(0.2	)
State	—			0.5			—
Foreign	(0.7		)	(2.2		)	—
Deferred income tax provision (benefit)	$	(42.4	)	$	3.8		$	(0.2	)

Income tax benefit	$	(45.9	)	$	(15.0	)	$	(7.5	)

Based on the income (loss) before income taxes:
Domestic	$	(152.8	)	$	(173.8	)	$	(366.1	)
Foreign	23.3			22.3			4.2
Loss before income taxes	$	(129.5	)	$	(151.5	)	$	(361.9	)

During 2013, the Company recognized $41.7 million of deferred benefit in the Statement of Consolidated Operations and an equal and offsetting deferred tax expense in other comprehensive income included in the Statement of Consolidated Comprehensive Loss due to the application of intraperiod tax allocation rules under ASC 740. This allocation has no effect on total tax provision or total valuation allowance.

Uncertain Tax Positions

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



(in millions)		2013			2012
Unrecognized tax benefits at January 1		$	29.7		$	27.1

Increases related to:
	Tax positions taken during a prior period	1.3			3.6
	Tax positions taken during the current period	0.9			0.9

Decreases related to:
	Lapse of applicable statute of limitations	(1.2		)	(1.9		)
	Settlements with taxing authorities	(3.1		)	—

Unrecognized tax benefits at December 31		$	27.6		$	29.7

At December 31, 2013 and 2012, there are $24.8 million and $25.8 million of benefits that, if recognized, would affect the effective tax rate. We accrued interest of $1.4 million and $2.2 million for the years ended December 31, 2013 and 2012 and reversed $2.6 million and $5.6 million of previously accrued interest on uncertain tax positions during the years ended December 31, 2013 and 2012 for a net reduction of $1.2 million and $3.4 million for 2013 and 2012. The reversal related primarily to settlements and other favorable resolution of prior uncertain positions. The total amount of interest accrued for uncertain tax positions is $14.5 million and $15.7 million as of as of December 31, 2013 and 2012. During the year ended December 31, 2013, we paid tax of $1.2 million and interest of $0.8 million to settle certain state and foreign audits of tax years 2001-08 for certain of our subsidiaries and we 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 $21.2 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, 2013:



Statute remains open		2005-2012
Tax years currently under examination/exam completed		2005-2012
Tax years not examined		2013