Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

Note 3. Income Taxes

        The company files a consolidated federal income tax return. Net cash paid for taxes was $75.9 million for the year ended December 31, 2011, and net cash received for taxes was $66.3 million and $59.4 million for the years ended December 31, 2010 and 2009, respectively. The current and deferred federal and state income tax expense (benefit) for the years ended December 31 is as follows (in thousands):

	2011		2010		2009
Current income tax expense (benefit)	$	128,209	$	39,554	$	(96,140	)
Deferred income tax expense		30,418		44,306		88,922
Total income tax expense (benefit)	$	158,627	$	83,860	$	(7,218	)

        A reconciliation of the statutory tax rates to the actual effective tax rates for the years ended December 31, are as follows:

	2011			2010			2009
Statutory federal tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.5			3.2			1.9
Other permanent differences		(1.1	)		1.1			2.7
Effective tax rate		37.4	%		39.3	%		39.6	%

        Significant components of the company's deferred tax assets and liabilities at December 31 are as follows (in thousands):

	2011			2010
Deferred tax assets
Capitalized start-up costs	$	29,182		$	29,728
Assets capitalized for tax, expensed for books		32,711			28,017
Accrued expenses		31,824			26,122
Total deferred tax assets		93,717			83,867
Deferred tax liabilities
Property, plant and equipment		(471,847	)		(448,557	)
Intangible assets		(79,778	)		(69,455	)
Other		(6,666	)		(2,603	)
Total deferred tax liabilities		(558,291	)		(520,615	)
Net deferred tax liability	$	(464,574	)	$	(436,748	)

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2011			2010			2009
Balance at January 1	$	49,396		$	49,587		$	47,875
Increases related to current year tax positions		2,046			300			780
Increases related to prior year tax positions		13,785			1,361			5,099
Decreases related to prior year tax positions		(196	)		(496	)		(3,766	)
Lapses in statutes of limitations		—			(1,128	)		(401	)
Settlements with taxing authorities		(476	)		(228	)		—
Balance at December 31	$	64,555		$	49,396		$	49,587

        Included in the balance of unrecognized tax benefits at December 31, 2011 are potential benefits of $24.6 million that, if recognized, would affect the effective tax rate. The company recognizes interest and penalties related to its tax contingencies on a net-of-tax basis in income tax expense. During the year ended December 31, 2011, the company recognized interest expense of $3.1 million, net of tax, and penalties of $35,000. In addition to the unrecognized tax benefits in the table above, the company had $16.1 million accrued for the payment of interest and penalties at December 31, 2011.

        The company files income tax returns in the U.S. federal jurisdiction as well as income tax returns in various state jurisdictions. The Internal Revenue Service (IRS) is currently examining the company's federal income tax returns for the years 2004 through 2009. At this time the company does not believe there will be any significant examination adjustments that would result in a material change to the company's financial position or results of operations. It is reasonably possible that the amount of unrecognized tax benefits could change in the next twelve months as a result of these state and federal income tax audits. Based on the current audits in process, the payment of taxes as a result of audit settlements could be in an amount from zero to $2.3 million by the end of 2012. With few exceptions, including those discussed above, the company is no longer subject to federal, state and local income tax examinations by tax authorities for years ended before 2008.