NOTE O. Income Taxes

The Company and its eligible subsidiaries file a consolidated United States federal income tax return. Certain subsidiaries are not eligible to be included in the consolidated United States federal income tax return and separate provisions for income taxes have been determined for these entities or groups of entities. The tax returns and the amount of taxable income or loss are subject to examination by United States federal, state, local and foreign taxing authorities. The Company made current and estimated tax payments of $22.3 million and $36.6 million (net of tax refunds) during 2011 and 2010, respectively, and received tax refunds (net of tax payments) during 2009 of $42.6 million. These payments and net refunds include tax payments related to Pioneer Tunisia's and Pioneer South Africa's operations of $12.2 million, $17.8 million and $10.6 million during 2011, 2010 and 2009, respectively. During 2009, the Company received $61.6 million of refunds as a result of carrying back 2007 and 2008 net operating losses. In November 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009, which expanded the carryback period from two years to five years and suspended certain loss utilization limitations. Pursuant to this new legislation, the Company filed an amended carryback claim and received an additional $19.9 million refund during 2010.

The Company continually assesses both positive and negative evidence to determine whether it is more likely than not that deferred tax assets can be realized prior to their expiration. Pioneer monitors Company-specific, oil and gas industry and worldwide economic factors and assesses the likelihood that the Company's net operating loss carryforwards ("NOLs") and other deferred tax attributes in the United States, state, local and foreign tax jurisdictions will be utilized prior to their expiration.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2011, the Company had no unrecognized tax benefits. The Company's policy is to account for interest charges with respect to income taxes as interest expense and any penalties, with respect to income taxes, as other expense in the consolidated statements of operations. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company believes that it is no longer subject to examinations by tax authorities for years before 2006. The Internal Revenue Service recently closed the examination of the 2007, 2008 and 2009 tax years, and is concluding an examination of the 2010 tax year. As of December 31, 2011, there are no proposed adjustments or uncertain positions in any jurisdiction that would have a significant effect on the Company's future results of operations or financial position. The Company's earliest open years in its key jurisdictions are as follows:


United States			2010
Various U.S. states			2007
Tunisia			2006
South Africa			2006

The Company's income tax (provision) benefit and amounts separately allocated were attributable to the following items for the years ended December 31, 2011, 2010 and 2009:


	Year Ended December 31,
	2011			2010			2009
	(in thousands)
Income from continuing operations	$	(197,644	)	$	(269,627	)	$	83,195
Income from discontinued operations		(257,950	)		270			(85,527	)
Changes in goodwill – tax benefits related to stock-based compensation		40			453			124
Changes in stockholders' equity:
Net deferred hedge gains		8,407			23,648			50,059
Tax benefits related to stock-based compensation		31,087			(153	)		1
Tax on Pioneer Southwest common units sold by the Company on December 12, 2011		(15,381	)		—			—

The Company's income tax (provision) benefit attributable to income from continuing operations consisted of the following for the years ended December 31, 2011, 2010 and 2009:


	Year Ended December 31,
	2011			2010			2009
	(in thousands)
Current:
U.S. federal	$	—		$	—		$	21,714
U.S. state		(9,065	)		(9,864	)		(10,010	)
Foreign		—			—			(551	)

		(9,065	)		(9,864	)		11,153

Deferred:
U.S. federal		(207,146	)		(263,063	)		63,970
U.S. state		18,567			3,300			8,072

		(188,579	)		(259,763	)		72,042


Income tax (provision) benefit	$	(197,644	)	$	(269,627	)	$	83,195

Income (loss) from continuing operations before income taxes less net income attributable to the noncontrolling interests consists of the following for the years ended December 31, 2011, 2010 and 2009:


	Year Ended December 31,
	2011		2010		2009
	(in thousands)
U.S. federal	$	608,981	$	740,785	$	(234,860	)
Foreign		—		—		(157	)

	$	608,981	$	740,785	$	(235,017	)

Reconciliations of the United States federal statutory tax rate to the Company's effective tax rate for income from continuing operations are as follows for the years ended December 31, 2011, 2010 and 2009:


	Year Ended December 31,
	2011			2010		2009
	(in percentages)
U.S. federal statutory tax rate		35.0			35.0		35.0
State income taxes (net of federal benefit)		(0.9	)		0.5		(0.4	)
Other		(1.6	)		0.9		0.8

Consolidated effective tax rate		32.5			36.4		35.4

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities related to continuing operations are as follows as of December 31, 2011 and 2010:


	December 31,
	2011			2010
	(in thousands)
Deferred tax assets:
Foreign tax credit carryforward	$	—		$	174,054
Asset retirement obligations		47,860			50,886
Other		82,828			78,014

Total deferred tax assets		130,688			302,954
Valuation allowances		—			(6,632	)

Net deferred tax assets		130,688			296,322
Deferred tax liabilities:
Oil and gas properties, principally due to differences in basis, depletion and the deduction of intangible drilling costs for tax purposes		(1,692,317	)		(1,663,343	)
Other property and equipment, principally due to the deduction of bonus depreciation for tax purposes		(102,351	)		(58,866	)
State taxes and other		(191,621	)		(117,685	)
Net deferred hedge gains		(144,558	)		(52,232	)

Total deferred tax liabilities		(2,130,847	)		(1,892,126	)

Net deferred tax liability	$	(2,000,159	)	$	(1,595,804	)


Reflected in accompanying consolidated balance sheets as:
Current deferred income tax asset	$	77,005		$	156,650
Current deferred income tax liability		—			(1,144	)
Non-current deferred income tax liability		(2,077,164	)		(1,751,310	)

Total	$	(2,000,159	)	$	(1,595,804	)

During 2010, the Company utilized all available NOLs in the United States and South Africa. At December 31, 2010, the Company had $174.1 million of foreign tax credit carryforwards, which were available to offset future U.S. regular taxable income, if any. As a result of the sale of Pioneer Tunisia during February 2011, the Company realized all of these carryforwards in 2011. Pursuant to GAAP, the Company's $174.1 million deferred tax asset related to the foreign tax credit carryforwards at December 31, 2010 is net of $12.2 million of unrealized excess tax benefits from stock based compensation.

The Company's income tax (provision) benefit attributable to income from discontinued operations consisted of the following for the years ended December 31, 2011, 2010 and 2009:


	Year Ended December 31,
	2011			2010			2009
	(in thousands)
Current:
U.S. state	$	(4,354	)	$	(538	)	$	(1,300	)
Foreign		(39,543	)		(24,948	)		(18,757	)

		(43,897	)		(25,486	)		(20,057	)

Deferred:
U.S. federal		(227,385	)		42,155			(48,879	)
U.S. state		(1,836	)		3			—
Foreign		15,168			(16,402	)		(16,591	)

		(214,053	)		25,756			(65,470	)


Income tax (provision) benefit	$	(257,950	)	$	270		$	(85,527	)