11. Income Taxes

The following summarizes income tax expense (benefit) and effective tax rates:



	Three Months Ended March 31,
millions except percentages	2014			2013
Income tax expense (benefit)	$	664		$	456
Effective tax rate	(34		)%	49		%

The Company reported a loss before income taxes for the three months ended March 31, 2014. As a result, items that ordinarily increase or decrease the tax rate will have the opposite effect. The decrease from the 35% U.S. federal statutory rate for the three months ended March 31, 2014, was primarily attributable to net changes in uncertain tax positions related to the settlement agreement associated with the Adversary Proceeding, tax expense associated with Algerian exceptional profits taxes, and the tax impact from foreign operations.

The Company previously recognized a deferred tax benefit of $274 million related to the $850 million loss recognized in 2013 with respect to the Tronox-related contingent liability. In the first quarter of 2014, the Company recognized an additional tax benefit of $282 million related to the additional $4.3 billion loss with respect to the Adversary Proceeding. This benefit is net of a $1.1 billion uncertain tax position due to the uncertainty related to the deductibility of the final settlement payment. This uncertain tax position is presented in deferred income taxes on the Company’s Consolidated Balance Sheet as a reduction to the associated deferred tax asset. The Company is a participant in the Internal Revenue Service’s (IRS) Compliance Assurance Process and has regular discussions with the IRS concerning its tax positions. Depending on the outcome of such discussions, it is reasonably possible that the amount of the uncertain tax position related to the settlement could materially change. See Note 10—Contingencies—Tronox Litigation.

The increase from the 35% U.S. federal statutory rate for the three months ended March 31, 2013, was primarily attributable to the tax impact from foreign operations and Algerian exceptional profits taxes.