Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

9. Income Taxes

Con-way's second-quarter and year-to-date effective tax rates in 2011 were 35.3% and 45.6%, respectively. In the second quarter and first half of 2010, the effective tax rates were 31.7% and 43.5%, respectively. The tax provision in 2011 included a $1.1 million second-quarter income-tax benefit associated with the reversal of a portion of Con-way's accrued liability for uncertain tax positions and a $5.9 million first-quarter charge due to the matter discussed below under "Uncertain Tax Positions." In 2010, the tax provision included a $2.2 million second-quarter income-tax benefit and a $2.3 million first-quarter charge related to health care legislation. Excluding these items and other less material discrete adjustments, the second-quarter and year-to-date effective tax rates in 2011 were 37.7% and 37.6%, respectively, compared to 42.6% in both periods of 2010. The rates in 2011 declined from 2010 due primarily to a benefit associated with a fuel-related tax credit that was not in effect during 2010 until legislation was enacted in December 2010.

Other accounts receivable in the consolidated balance sheets include income tax receivables of $10.6 million and $41.2 million at June 30, 2011 and December 31, 2010, respectively.

Uncertain Tax Positions

Con-way is subject to examination for federal income taxes for 2005 to 2010. The Internal Revenue Service ("IRS") has issued a Revenue Agent's Report for tax years 2005 through 2007 proposing certain adjustments, one of which relates primarily to the treatment of certain payments to retirees and former employees of Menlo Worldwide Forwarding, Inc. and its subsidiaries and Menlo Worldwide Expedite!, Inc. (collectively "MWF") by Con-way after the sale of MWF to United Parcel Service, Inc. in 2004. Con-way disagrees with this proposed adjustment and has contested it through the IRS administrative appeals process. Con-way met with the IRS Appeals Division, and following negotiations, the IRS requested an offer from Con-way in July 2011 to settle. In July 2011, the IRS accepted Con-way's offer to settle at an amount approximating the current liability recognized. Ultimate resolution of this matter is subject to final approval and documentation.

Due primarily to the matter discussed above, Con-way's estimated liability for unrecognized tax benefits increased to $18.2 million (including $6.5 million of accrued interest and penalties) at June 30, 2011 from $15.9 million (including $6.1 million of accrued interest and penalties) at December 31, 2010.