Income Taxes (Notes)

6 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Abstract]

Income Taxes [Text Block]

3. INCOME TAXES

Rayonier is a real estate investment trust ("REIT"). In general, only the taxable REIT subsidiaries, whose businesses include the Company's non-REIT qualified activities, are subject to corporate income taxes. However, the Company is subject to U.S. federal corporate income tax on built-in gains (the excess of fair market value over tax basis for property held upon REIT election at January 1, 2004) on taxable sales of such property during calendar years 2004 through 2010 and 2012 through 2013. In 2011, the law provided a built-in-gains tax holiday. Accordingly, the provision for corporate income taxes relates principally to current and deferred taxes on taxable REIT subsidiaries' income and certain property sales.

The Company's effective tax rate is below the 35 percent U.S. statutory tax rate primarily due to tax benefits associated with being a REIT. Effective tax rates for the quarter and year-to-date were 16.4 percent and 20.8 percent compared to 15.4 percent and 18.7 percent in 2011, respectively. The higher tax rate in 2012 was due to proportionately higher expected earnings from our taxable REIT subsidiaries, which was partially offset by the tax credit exchange discussed below.

The U.S. Internal Revenue Code allowed two credits for taxpayers that produced and used an alternative fuel in the operation of their business through December 31, 2009. The alternative fuel mixture credit ("AFMC") was a $.50 per gallon refundable, non-taxable excise tax credit, while the cellulosic biofuel producer credit ("CBPC") was a $1.01 per gallon credit that is nonrefundable, taxable and has limitations based on an entity's tax liability. Rayonier produces and uses an alternative fuel ("black liquor") at its Jesup, Georgia and Fernandina Beach, Florida Performance Fibers mills, which qualified for both credits. The Company claimed the AFMC on its 2009 tax return.

In the second quarters of 2012 and 2011, management approved the exchange of approximately 60 million gallons and 30 million gallons, respectively, of black liquor previously claimed for the AFMC for the CBPC. In order to complete the exchange, Rayonier is required to pay the IRS interest related to funds received for the AFMC in 2010. The net impact of the exchanges was $5.7 million and $4.1 million for the three months ended June 30, 2012 and 2011, respectively. The 2012 net benefit is recorded separately as a tax benefit of $9.1 million and interest expense of $3.4 million. There was minimal interest expense in 2011 related to the exchange. For additional information on the AFMC and CBPC, see Note 8 — Income Taxes in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.