Income Taxes

Reconciliations between the effective tax rate on income/(loss) from continuing operations before income taxes and the federal statutory rate are presented below.



	December 30, 2012					December 25, 2011					December 26, 2010
(In thousands)	Amount			% of Pre-tax		Amount			% of Pre-tax		Amount			% of Pre-tax
Tax at federal statutory rate	$	92,156		35.0	%	$	29,129		35.0	%	$	30,943		35.0	%
State and local taxes, net	17,651			6.7		14,833			17.8		15,375			17.4
Effect of enacted changes in tax laws	—			—		(1,520		)	(1.8	)	11,370			12.9
Reduction in uncertain tax positions	(6,722		)	(2.6	)	(12,105		)	(14.5	)	(21,722		)	(24.6	)
(Gain)/loss on Company-owned life insurance	(2,690		)	(1.0	)	36			—		(3,319		)	(3.8	)
Other, net	3,087			1.2		1,559			1.9		670			0.8
Income tax expense	$	103,482		39.3		$	31,932		38.4		$	33,317		37.7

The components of income tax expense as shown in our Consolidated Statements of Operations were as follows:



(In thousands)	December 30, 2012		December 25, 2011			December 26, 2010
Current tax expense/(benefit)
Federal	$	35,429	$	(30,185	)	$	(3,139	)
Foreign	1,153		1,110			682
State and local	181		(6,793		)	(11,460		)
Total current tax expense/(benefit)	36,763		(35,868		)	(13,917		)
Deferred tax expense
Federal	55,143		20,464			36,055
Foreign	—		37,471			2,137
State and local	11,576		9,865			9,042
Total deferred tax expense	66,719		67,800			47,234
Income tax expense	$	103,482	$	31,932		$	33,317

As of December 30, 2012, we had no federal net operating loss carryforwards.

State tax operating loss carryforwards totaled $10.5 million as of December 30, 2012 and $15.1 million as of December 25, 2011. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives generally ranging from 1 to 20 years.

The components of the net deferred tax assets and liabilities recognized in our Consolidated Balance Sheets were as follows:



(In thousands)	December 30, 2012			December 25, 2011
Deferred tax assets
Retirement, postemployment and deferred compensation plans	$	400,292		$	447,156
Accruals for other employee benefits, compensation, insurance and other	36,959			39,572
Accounts receivable allowances	6,111			7,114
Other	84,527			109,946
Gross deferred tax assets	527,889			603,788
Valuation allowance	(42,138		)	(39,824		)
Net deferred tax assets	$	485,751		$	563,964
Deferred tax liabilities
Property, plant and equipment	$	108,763		$	143,308
Intangible assets	—			42,150
Investments in joint ventures	13,430			15,095
Other	4,266			10,073
Gross deferred tax liabilities	126,459			210,626
Net deferred tax asset	$	359,292		$	353,338
Amounts recognized in the Consolidated Balance Sheets
Deferred tax asset – current	$	58,214		$	73,055
Deferred tax asset – long-term	301,078			280,283
Net deferred tax asset	$	359,292		$	353,338

We assess whether a valuation allowance should be established against deferred tax assets based on the consideration of both positive and negative evidence using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. We evaluated our deferred tax assets for recoverability using a consistent approach that considers our three-year historical cumulative income/(loss), including an assessment of the degree to which any such losses were due to items that are unusual in nature (e.g., impairments of non-deductible goodwill and intangible assets).

We had a valuation allowance totaling $42.1 million as of December 30, 2012 and $39.8 million as of December 25, 2011 for deferred tax assets primarily associated with net operating losses of non-U.S. operations, as we determined these assets were not realizable on a more-likely-than-not basis. The valuation allowance was allocated in proportion to the related current and noncurrent gross deferred tax asset balances.

Income tax benefits related to the exercise or vesting of equity awards reduced current taxes payable by $2.4 million in 2012, $1.6 million in 2011 and $2.1 million in 2010.

As of December 30, 2012 and December 25, 2011, “Accumulated other comprehensive loss, net of income taxes” in our Consolidated Balance Sheets and for the years then ended in our Consolidated Statements of Changes in Stockholders’ Equity was net of deferred tax assets of approximately $377 million and $370 million, respectively.

A reconciliation of unrecognized tax benefits is as follows:



(In thousands)	December 30, 2012			December 25, 2011			December 26, 2010
Balance at beginning of year	$	47,971		$	55,636		$	70,578
Gross additions to tax positions taken during the current year	5,241			4,094			2,565
Gross reductions to tax positions taken during the current year	—			—			—
Gross additions to tax positions taken during the prior year	258			460			—
Gross reductions to tax positions taken during the prior year	(922		)	(970		)	(13,347		)
Reductions from settlements with taxing authorities	—			(1,941		)	—
Reductions from lapse of applicable statutes of limitations	(7,240		)	(9,308		)	(4,160		)
Balance at end of year	$	45,308		$	47,971		$	55,636

The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate was approximately $30 million as of December 30, 2012 and $31 million as of December 25, 2011.

We also recognize accrued interest expense and penalties related to the unrecognized tax benefits within income tax expense or benefit. The total amount of accrued interest and penalties was approximately $16 million as of December 30, 2012 and December 25, 2011. The total amount of accrued interest and penalties was a net benefit of $0.3 million in 2012, $1.4 million in 2011 and $6.3 million in 2010.

With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2004. Management believes that our accrual for tax liabilities is adequate for all open audit years. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.

It is reasonably possible that certain income tax examinations may be concluded, or statutes of limitation may lapse, during the next 12 months, which could result in a decrease in unrecognized tax benefits of approximately $16 million that would, if recognized, impact the effective tax rate.