Income Taxes:

($ in thousands)



	Three months ended
	March 31, 2014			March 31, 2013
Benefit for income taxes	$	(24,232	)	$	(7,979	)
Effective tax rate	38		%	35		%

The effective tax rate for the three months ended March 31, 2014 and March 31, 2013 reflect our nondeductible portion of the annual pharmaceutical manufacturers’ fee under the Patient Protection and Affordable Care Act, offset by benefits for deductions specific to U.S. domestic manufacturing companies.

Current deferred income tax assets at March 31, 2014 consist of temporary differences primarily related to accounts receivable reserves, inventory reserves, accrued legal settlements and net operating loss carryforwards. Non-current deferred income tax liabilities at March 31, 2014 consist of timing differences primarily related to intangible assets, debt and depreciation.

The Company and Anchen are currently being audited by the IRS for the tax years 2009, 2010 and 2011. Par Pharmaceutical Companies, Inc. is no longer subject to IRS audit for periods prior to 2009. Anchen is also currently under audit in one state jurisdiction for the years 2005 to 2010. We are also currently under audit in one additional state jurisdiction for the years 2003 through 2009. In most other state jurisdictions, we are no longer subject to examination by state tax authorities for years prior to 2008.

We reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of income tax provision or benefit.

The difference between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to ASC 740-10 represents an unrecognized tax benefit. An unrecognized tax benefit is a liability that represents a potential future obligation to the taxing authorities. As of March 31, 2014, we had $20,960 thousand included in “Long-term liabilities” and $949 thousand in “Accrued expenses and other current liabilities” on the condensed consolidated balance sheet that represented unrecognized tax benefits, interest and penalties based on evaluation of tax positions. During the three months ended March 31, 2014, we recorded an increase in unrecognized tax benefits of $1,299 thousand as a result of tax positions taken during the quarter. We expect that a portion of this total liability could potentially settle in the next 12 months. However, the dollar range for a potential settlement cannot be estimated at this time.