Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

(9)   Income Taxes:

The following is a reconciliation of the provision for income taxes computed at federal statutory rates to the effective rates:

		For the three months ended		For the nine months ended
	September 30,			September 30,
		2011	2010		2011	2010
Consolidated tax provision at federal statutory rate		35.0%	35.0%		35.0%	35.0%
Reversal of tax credits		-	-		5.9	-
State income tax provisions, net of federal income
tax benefit		9.6	7.1		3.8	3.3
Non-deductuctible Transaction costs		-	17.4		-	6.1
Tax reserve adjustment		(91.2)	-		(8.1)	-
All other, net		1.4	(1.9)		0.7	0.5
Effective tax rate		(45.2%)	57.6%		37.3%	44.9%

Income taxes for the third quarter of 2011 and the nine months ended September 30, 2011 include the reversal of uncertain tax positions of $14.0 million.  Income taxes for the nine months ended September 30, 2011 includes the impact of a $10.5 million charge resulting from the enactment on May 25, 2011 of the Michigan Corporate Income Tax which eliminated certain future tax deductions.

In the third quarter of 2010, Frontier reduced certain deferred tax assets of approximately $12.0 million related to Transaction costs which were not tax deductible.  Prior to the closing of the Transaction, these costs were deemed to be tax deductible as the Transaction had not yet been successfully completed.  These costs were incurred to facilitate the Transaction and as such must be capitalized for tax purposes.  Income taxes for the nine months ended September 30, 2010 also includes the impact of a $4.1 million charge resulting from health care reform legislation associated with the passage of the Patient Protection and Affordable Care Act and of the Health Care and Education Reconciliation Act of 2010 (the Acts).  The health care reform legislation enacted in March 2010 under the Acts eliminated the tax deduction for the subsidy that the Company receives under Medicare Part D for prescription drug costs.

The amount of our uncertain tax positions whose statute of limitations are expected to expire during the next twelve months and which would affect our effective tax rate is $9.1 million as of September 30, 2011.