7.	Income Taxes


	Nine Months Ended September 30,
	2012			2011
Estimated effective income tax rate:
Continuing operations		15.9	%		23.6	%

Discontinued operations		34.6	%		40.6	%

Consolidated overall		15.8	%		22.8	%

The Corporation’s effective income tax rate reflects the effect of federal and state income taxes and the impact of differences in book and tax accounting arising from the net permanent benefits associated with the statutory depletion deduction for mineral reserves, the impact of foreign losses for which no tax benefit was realized and the domestic production deduction. The effective income tax rates for discontinued operations reflect the tax effects of individual operations’ transactions and are not indicative of the Corporation’s overall effective income tax rate.

The consolidated overall estimated effective income tax rate for the nine months ended September 30, 2012 included the following discrete events: a refund of federal tax and interest of $1,626,000 related to the 2006 tax year and the estimated effects of an agreement between the taxing authorities of the United States and Canada regarding the transfer price of products for intercompany shipments during the years 2007 to 2011. The effects of the agreement allow the Corporation to utilize certain net operating loss and tax credit carryforwards for which a valuation allowance was previously established. Accordingly, the Corporation reversed a $3,644,000 valuation allowance during the quarter ended September 30, 2012. These discrete events drove a decrease in the consolidated overall estimated effective income tax rate for the nine months ended September 30, 2012. The consolidated overall estimated effective income tax rate for the nine months ended September 30, 2012 would have been 22.7% without these discrete events; a rate more reflective of the expected annual tax rate of 23%.

The consolidated overall estimated effective income tax rate for the nine months ended September 30, 2011 included the following discrete events: the favorable effective settlement of the Internal Revenue Service audit for the 2008 tax year; resolution of a federal tax and interest overpayment of $1,730,000 related to the 2006 tax year and an agreed-upon refund of $1,060,000 for the double taxation of the Corporation’s wholly-owned Canadian subsidiary for the 2001 and 2002 tax years.

On December 23, 2011, the U.S. Treasury Department issued comprehensive temporary and proposed regulations addressing the treatment of expenditures related to tangible property for tax purposes. On March 7, 2012, the Internal Revenue Service (“IRS”) issued two revenue procedures containing administrative guidance related to the adoption of the new rules. Although the regulations are generally effective for tax years beginning January 1, 2012, the IRS has granted taxpayers administrative relief and audit protection for a two-year period as long as the taxpayer adopts the regulations retroactively within two years of the effective date. Management has begun to evaluate the changes necessary to comply with the regulations and the related administrative procedures and is not currently aware of any adjustments that would be material to the Corporation’s consolidated financial position and results of operations. As part of its compliance with these regulations, the Corporation reversed its unrecognized tax benefits related to repairs and maintenance as of March 31, 2012.

The Corporation’s unrecognized tax benefits, excluding interest, correlative effects and indirect benefits, are as follows:


	Nine Months Ended September 30, 2012
	(Dollars in Thousands)
Unrecognized tax benefits at beginning of period	$	9,288
Gross increases – tax positions in prior years		19,527
Gross decreases – tax positions in prior years		(13,876	)
Gross increases – tax positions in current year		1,409
Settlements with taxing authorities		(555	)

Unrecognized tax benefits at end of period	$	15,793

For the nine months ended September 30, 2012, gross increases in tax positions in prior years included the estimated effect of the agreement with the taxing authority of Canada that increased the sales price charged for intercompany shipments during the years 2007 through 2011. Upon final settlement, the Corporation will be allowed a corresponding refund of tax in the United States for the years 2007 through 2011 which is not included in the unrecognized tax benefits at September 30, 2012. Accordingly, the Corporation anticipates that it is reasonably possible that unrecognized tax benefits may significantly change up to $9,007,000, excluding indirect benefits, during the twelve months ending September 30, 2013.

At September 30, 2012, unrecognized tax benefits of $6,546,000, net of federal tax benefits and related to interest accruals and permanent income tax differences, would have favorably affected the Corporation’s effective income tax rate if recognized.