INCOME TAXES

9 Months Ended

Sep. 30, 2012

INCOME TAXES

INCOME TAXES

International Paper made income tax payments, net of refunds, as follows:

	Nine Months Ended September 30,
In millions	2012		2011
Income tax payments (refunds)	$	41	$	10

The following table presents a rollforward of unrecognized tax benefits and related accrued estimated interest and penalties for the nine months ended September 30, 2012:

In millions	Unrecognized Tax Benefits				Accrued Estimated Interest and Tax Penalties
Balance at December 31, 2011	$	(857	)		$	(88	)
Activity for three months ended March 31, 2012	(119		)	(a)	(10		)
Activity for three months ended June 30, 2012	(5		)		—
Activity for three months ended September 30, 2012	2				1
Balance at September 30, 2012	$	(979	)		$	(97	)

(a) This activity primarily relates to the unrecognized tax benefits and related accrued interest and penalties assumed as part of the acquisition of Temple-Inland.

The Company currently estimates that, as a result of ongoing discussions, pending tax settlements and expirations of statutes of limitations, the amount of unrecognized tax benefits could be reduced by approximately $855 million during the next 12 months and approximately $820 million of this reduction will positively impact the effective rate.

Included in the Company’s income tax provisions (both continuing and discontinued operations) for the nine months ended September 30, 2012 and 2011, are $81 million and $276 million of income tax benefits, respectively, related to special items. The components of the net provision related to special items were as follows:

	Nine Months Ended September 30,
In millions	2012			2011
Special items and other charges:
Restructuring and other charges	$	(87	)	$	(266	)
Tax-related adjustments:
Temple-Inland acquisition	3			—
State tax adjustments	—			5
Expired tax contingency reserves	—			(15		)
Mexican business restructuring	3			—
Income tax provision (benefit) related to special items and discontinued operations	$	(81	)	$	(276	)