Income Taxes

We file a consolidated federal income tax return, consolidated unitary returns in certain states, and other separate state income tax returns for certain of our subsidiary companies.

The provision for income taxes consisted of the following:



	For the years ended December 31,
(in thousands)	2012			2011			2010
Current:
Federal	$	770		$	(27,918	)	$	(27,710	)
State and local	365			1,185			(11,033		)
Total	1,135			(26,733		)	(38,743		)
Tax benefits of compensation plans allocated to additional paid-in capital	7,553			6,946			13,992
Total current income tax provision	8,688			(19,787		)	(24,751		)
Deferred:
Federal	18,023			16,637			28,270
Other	1,943			3,110			3,414
Total	19,966			19,747			31,684
Deferred tax allocated to other comprehensive income	(11,669		)	(9,961		)	(6,093		)
Total deferred income tax provision	8,297			9,786			25,591
Provision (benefit) for income taxes	$	16,985		$	(10,001	)	$	840

The difference between the statutory rate for federal income tax and the effective income tax rate was as follows:



	For the years ended December 31,
	2012		2011		2010
Statutory rate	35.0	%	35.0	%	35.0	%
Effect of:
State and local income taxes, net of federal income tax benefit	2.1		(1.8	)	7.3
Reserve for uncertain tax positions	(7.3	)	(1.9	)	(48.9	)
Miscellaneous	—		7.6		9.5
Effective income tax rate	29.8	%	38.9	%	2.9	%

We believe adequate provision has been made for all open tax years.

The approximate effect of the temporary differences giving rise to deferred income tax (liabilities) assets were as follows:



	As of December 31,
(in thousands)	2012			2011
Temporary differences:
Property, plant and equipment	$	(46,016	)	$	(51,174	)
Goodwill and other intangible assets	1,605			15,384
Investments, primarily gains and losses not yet recognized for tax purposes	3,128			1,555
Accrued expenses not deductible until paid	16,213			13,357
Deferred compensation and retiree benefits not deductible until paid	61,703			52,398
Other temporary differences, net	244			1,463
Total temporary differences	36,877			32,983
State net operating loss carryforwards	6,984			8,520
Valuation allowance for state deferred tax assets	(556		)	(1,570		)
Net deferred tax asset	$	43,305		$	39,933

Total state operating loss carryforwards were $392 million at December 31, 2012. Our state tax loss carryforwards expire through 2028. Because we file separate state income tax returns for certain of our subsidiary companies, we are not able to use state tax losses of a subsidiary company to offset state taxable income of another subsidiary company.

Deferred tax assets totaled $43.3 million at December 31, 2012. Management believes that it is more likely than not that we will realize the benefits of our Federal deferred tax assets and therefore has not recorded a valuation allowance for our Federal deferred tax assets. If economic conditions worsen, future estimates of taxable income could be lower than our current estimates, which may require valuation allowances to be recorded in future reporting periods.

We recognize state net operating loss carryforwards as deferred tax assets, subject to valuation allowances. At each balance sheet date, we estimate the amount of carryforwards that are not expected to be used prior to expiration of the carryforward period. The tax effect of the carryforwards that are not expected to be used prior to their expiration is included in the valuation allowance.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:



	For the years ended December 31,
(in thousands)	2012			2011			2010
Gross unrecognized tax benefits at beginning of year	$	21,240		$	20,010		$	27,910
Increases in tax positions for prior years	623			1,500			400
Decreases in tax positions for prior years	(1,287		)	(270		)	(15,900		)
Increases in tax positions for current year	—			—			8,400
Decreases from lapse in statute of limitations	(4,190		)	—			—
Settlements	—			—			(800		)
Gross unrecognized tax benefits at end of year	$	16,386		$	21,240		$	20,010

The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $10 million at December 31, 2012. We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes. At December 31, 2012 and 2011, we had accrued interest related to unrecognized tax benefits of $2.5 million and $2.4 million, respectively.

We file income tax returns in the U.S. and in various state, and local jurisdictions. We are routinely examined by tax authorities in these jurisdictions. At December 31, 2012 we are no longer subject to federal income tax examinations for years prior to 2009. For state and local jurisdictions we are no longer subject to income tax examinations for years prior to 2005.

In 2012 we recognized $5.5 million of previously unrecognized tax benefits primarily due to the lapse of the statute of limitations lapsed in certain tax jurisdictions.

During 2011, we settled the examinations of our 2005 to 2009 Federal income tax returns with the Internal Revenue Service. Our tax benefit was increased $1.6 million due to the realization of previously unrecognized tax benefits.

During 2010, we settled the examinations of several state and local tax returns for periods through 2008. Our tax provision was reduced by $14.0 million due to the realization of previously unrecognized tax benefits for settlement of issues for state and local jurisdictions.

Due to the potential for resolution of Federal and state examinations, and the expiration of various statutes of limitation, it is reasonably possible that our gross unrecognized tax benefits balance may change within the next twelve months by as much as $1.3 million.