Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

INCOME TAXES

6. INCOME TAXES

The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was approximately $3.7 million as of September 30, 2011. During the three months ended September 30, 2011, the Company decreased liabilities for uncertain tax positions by $4.0 million as a result of a favorable resolution of an issue on appeal with the Internal Revenue Service (“IRS”) related to its examination of Triad Hospitals, Inc.’s (“Triad”) tax returns. For the nine months ended September 30, 2011, the Company decreased liabilities for uncertain tax positions by $3.4 million and decreased interest and penalties by approximately $0.4 million. A total of approximately $1.0 million of interest and penalties is included in the amount of the liability for uncertain tax positions at September 30, 2011. It is the Company’s policy to recognize interest and penalties related to unrecognized benefits in its condensed consolidated statements of income as income tax expense.

The Company believes that it is reasonably possible that approximately $2.1 million of its current unrecognized tax benefit may be recognized within the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities.

The Company, or one of its subsidiaries, files income tax returns in the United States federal jurisdiction and various state jurisdictions. The Company has extended the federal statute of limitations for Triad for the tax periods ended December 31, 1999, December 31, 2000, April 30, 2001, June 30, 2001, December 31, 2001, December 31, 2002 and December 31, 2003. The IRS has concluded its examination of the federal tax return of Triad for the tax periods ended December 31, 2004, December 31, 2005, December 31, 2006 and July 25, 2007. In September 2011, the Company reached a favorable resolution of an issue on appeal with the IRS related to its examination of Triad’s tax returns. As a result, the Company recognized a tax benefit of $4.0 million, which is reflected in the accompanying condensed consolidated statement of income for the three and nine months ended September 30, 2011. With few exceptions, the Company is no longer subject to state income tax examinations for years prior to 2007 and federal income tax examinations with respect to Community Health Systems, Inc. federal returns for years prior to 2007. The Company’s federal income tax returns for the 2007 and 2008 tax years are currently under examination by the IRS. The Company believes the results of this examination will not be material to its consolidated results of operations or consolidated financial position.

Cash paid for income taxes, net of refunds received, resulted in net cash paid of $23.0 million and $49.2 million for the three months ended September 30, 2011 and 2010, respectively. Cash paid for income taxes, net of refunds received, resulted in a net cash refund of $2.7 million and net cash paid of $128.9 million for the nine months ended September 30, 2011 and September 30, 2010, respectively.