Note 5: Income Taxes

The following table lists the components of the provision (benefit) for income taxes:

Years ended December 31,	2011		2010			2009
(in thousands)
Current provision (benefit):
Federal	$	91,415	$	56,289		$	(13,490	)
State		12,938		11,180			235
Foreign		1,007		1,059			832
Deferred provision (benefit):
Federal		70,599		22,833			1,698
State		6,475		(571	)		(29	)
Total income tax provision (benefit)	$	182,434	$	90,790		$	(10,754	)

Reconciliation between the federal statutory rate and RPC’s effective tax rate is as follows:

Years ended December 31,	2011			2010			2009
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.1			2.9			(2.4	)
Tax credits		(0.2	)		(0.6	)		1.3
Non-deductible expenses		0.4			0.4			(2.6	)
Other		(0.2	)		0.5			0.8
Effective tax rate		38.1	%		38.2	%		32.1	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:

December 31,	2011			2010
(in thousands)
Deferred tax assets:
Self-insurance	$	6,344		$	5,643
Pension		8,922			6,715
State net operating loss carryforwards		1,671			2,955
Bad debts		3,044			3,219
Accrued payroll		2,099			1,460
Stock-based compensation		3,680			2,538
All others		1			232
Valuation allowance		(1,295	)		(1,295	)
Gross deferred tax assets		24,466			21,467
Deferred tax liabilities:
Depreciation		(166,190	)		(89,456	)
Goodwill amortization		(5,707	)		(5,020	)
All Others		(1,314	)		(453	)
Gross deferred tax liabilities		(173,211	)		(94,929	)
Net deferred tax liabilities	$	(148,745	)	$	(73,462	)

Historically and currently, undistributed earnings of the Company’s foreign subsidiaries are considered indefinitely reinvested and, accordingly, no provision for U.S. federal income taxes has been recorded. Deferred taxes are provided for earnings outside the United States when those earnings are not considered indefinitely reinvested.

As of December 31, 2011, the Company has net operating loss carryforwards related to state income taxes of approximately $38.2 million that will expire between 2012 and 2030. As of December 31, 2011 the Company has a valuation allowance of approximately $1.3 million, representing the tax effected amount of loss carryforwards that the Company does not expect to utilize, against the corresponding deferred tax asset.

Total net income tax payments (refunds) were $90,729,000 in 2011, $61,632,000 in 2010, and ($8,351,000) in 2009.

The Company’s policy is to record interest and penalties related to income tax matters as income tax expense. Accrued interest and penalties were immaterial to the financial statements as of December 31, 2011 and 2010.

In accordance with the accounting guidance relating to the accounting for uncertainty in income tax reporting, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions, the Company did not recognize a material adjustment in the liability for unrecognized income tax benefits.

The Company’s liability for unrecognized tax benefits was $35,000 as of December 31, 2011 and $33,000 as of December 31, 2010, all of which would affect our effective rate if recognized. A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2011 and 2010 are as follows:

Years Ended December 31,	2011		2010
(in thousands)
Beginning balance	$	33	$	30
Additions based on tax positions related to current year		-		-
Additions for tax positions of prior years		2		3
Reductions for tax positions of prior years		-		-
Ending balance	$	35	$	33

The Company and its subsidiaries are subject to U.S. federal and state income tax in multiple jurisdictions. In many cases our uncertain tax positions are related to tax years that remain open and subject to examination by the relevant taxing authorities. The Company’s 2008 through 2011 tax years remain open to examination.

It is reasonably possible that the amount of the unrecognized tax benefits with respect to our unrecognized tax positions will increase or decrease in the next 12 months. These changes may be the result of, among other things, state tax settlements under Voluntary Disclosure Agreements. However, quantification of an estimated range cannot be made at this time.