Income Taxes

3 Months Ended

Mar. 30, 2013

Income Taxes

7. Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction, and multiple state and foreign jurisdictions. Years prior to 2010 are no longer subject to U.S. Federal income tax examination. During the first quarter of 2013, the Company received notice that all audit work related to U.S. federal income tax returns for the years 2006 through 2009 is complete and closed. The Company is no longer subject to state income tax examinations by tax authorities in its major state jurisdictions for years before 2003, and the Company is no longer subject to income tax examinations prior to 2005 for its major foreign jurisdictions.

As discussed in Note 5, “Timber Notes/Non-Recourse Debt,” at the time of the sale of the timberlands in 2004, we generated a tax gain and recognized the related deferred tax liability. The timber installment notes structure allowed the Company to defer the resulting tax liability until 2020, the maturity date for the Installment Notes. As the tax gain associated with the Lehman Guaranteed Installment Note was recognized in 2012, the remaining tax liability of $260 million at March 30, 2013, is related to the Wells Guaranteed Installment Notes and will be recognized when the Wells Guaranteed Installment Notes are paid.

As of March 30, 2013, the Company had $6.3 million of total unrecognized tax benefits, $6.2 million of which would affect the Company’s effective tax rate if recognized. Any future adjustments would result from the effective settlement of tax positions with various tax authorities. The Company does not anticipate any tax settlements to occur within the next twelve months. The reconciliation of the beginning and ending unrecognized tax benefits is as follows:

	Amount
	(thousands)
Unrecognized gross tax benefits balance at December 29, 2012	$	6,337
Increase related to prior year tax positions		15
Decrease related to prior year tax positions		(5	)
Settlements		(2	)
Unrecognized tax benefits balance at March 30, 2013	$	6,345

During the first three months of 2013 and 2012, cash payments, net of refunds received, for income taxes were as follows:

	2013		2012
	(thousands)
Cash tax payments, net	$	4,073	$	5,169