13. Income Taxes

The following summarizes our income tax benefit (provision) (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Total current income tax benefit (provision)	$	53,587		$	(12,055	)	$	51,408		$	(17,408	)
Total deferred income tax provision		(21,827	)		(5,170	)		(28,700	)		(35,599	)

Total income tax benefit (provision)		31,760			(17,225	)		22,708			(53,007	)
Income tax provision included in income from discontinued operations		(4,856	)		(1,797	)		(16,449	)		(25,628	)

Income tax benefit (provision) on income from continuing operations	$	36,616		$	(15,428	)	$	39,157		$	(27,379	)

The deferred income tax provisions for the three and nine months ended September 30, 2012 include a benefit of $2.6 million and $1.1 million, respectively, to reduce our valuation allowance against net deferred tax assets after having determined, based on all available evidence, that with the Sale it is more likely than not that we will realize a future benefit from that portion of our deferred tax assets.

The following summarizes amounts for uncertain tax positions (“UTPs”) included in our income tax benefit (provision) (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Current benefit (provision) for UTPs	$	52,934		$	(12,004	)	$	51,021		$	(14,483	)
Deferred (provision) benefit for UTPs		(7,084	)		12,236			(6,646	)		16,503

Total income tax benefit for UTPs		45,850			232			44,375			2,020
(Provision) benefit for UTPs included in income from discontinued operations		(1,111	)		1,266			(3,228	)		2,159

Benefit (provision) for UTPs on income from continuing operations	$	46,961		$	(1,034	)	$	47,603		$	(139	)

As of September 30, 2012, we had unrecognized tax benefits relating to UTPs of $81 million. Pursuant to the Purchase Agreement for the Sale, we will, in general, indemnify SS/L for taxes related to periods prior to the closing of the transaction. The Company recognizes potential accrued interest and penalties related to UTPs in income tax expense on a quarterly basis. As of September 30, 2012, we have accrued approximately $17.4 million and $13.3 million for the payment of potential tax-related interest and penalties, respectively.

With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years prior to 2007. Earlier years related to certain foreign jurisdictions remain subject to examination. Various state and foreign income tax returns are currently under examination. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carryforward. While we intend to contest any future tax assessments for uncertain tax positions, no assurance can be provided that we would ultimately prevail. During the three months ended September 30, 2012, the statute of limitations for assessment of additional tax expired with regard to certain UTPs related to Old Loral which resulted in a $26.5 million reduction to our unrecognized tax benefits and a $47 million benefit to our income tax provision on income from continuing operations, which included the reversal of applicable interest and penalties previously accrued. During the next twelve months, the statute of limitations for assessment of additional tax will expire with regard to UTPs related to several of our federal and state income tax returns filed for 2007, 2008 and 2009 potentially resulting in a $34.4 million reduction to our unrecognized tax benefits. This reduction would provide a $41 million benefit to our income tax provision on income from continuing operations.

The following summarizes the changes to our liabilities for UTPs included in long-term liabilities in the condensed consolidated balance sheets (in thousands):


	Nine Months Ended September 30,
	2012			2011
Liabilities for UTPs:
Opening balance — January 1	$	139,916		$	122,857
Current (benefit) provision for:
Unrecognized tax benefits		(587	)		12,821
Potential additional interest		4,632			4,431
Potential penalty adjustment		(374	)		1,872
Statute expirations		(54,690	)		(1,382	)
Tax settlements		—			(3,259	)

Ending balance — September 30	$	88,897		$	137,340

As of September 30, 2012, if none of our positions are overturned by the taxing authorities, the Company’s future income tax provisions on income from continuing operations would be reduced by approximately $64 million. We anticipate that, after completing our analysis of the Sale, our unrecognized tax benefits would increase by approximately $10 million. Other than as described above, there were no significant changes to our uncertain tax positions during the nine months ended September 30, 2012 and 2011, and we do not anticipate any other significant changes to our unrecognized tax benefits during the next twelve months.