INCOME TAXES

6 Months Ended

Jun. 30, 2011

INCOME TAXES [Abstract]

INCOME TAXES

INCOME TAXES

The following table accounts for the difference between the actual tax provision and the amounts obtained by applying the statutory U.S. federal income tax rate of 35% to income before taxes.

	Three Months Ended June 30,						Six Months Ended June 30,
Effective Tax Rate Reconciliation (Percent)	2011			2010			2011			2010
Statutory federal tax rate		35.0	%		35.0	%		35.0	%		35.0	%
Foreign rate differential		(0.1	)		(0.1	)		—			(0.3	)
Domestic manufacturing/export tax incentive		(1.8	)		(1.3	)		(0.6	)		(0.8	)
Dividends paid to CEOP		(0.5	)		(0.7	)		(0.2	)		(1.6	)
State income taxes, net		2.3			2.6			0.9			1.3
Reductions due to statute of limitations		—			(3.7	)		—			(6.9	)
Change in valuation allowance		—			0.5			—			(3.5	)
Return to provision		1.1			—			0.2			—
Remeasurement of deferred taxes		(2.4	)		—			(1.7	)		—
Incremental tax effect of SunBelt remeasurement		—			—			4.4			—
Other, net		0.3			0.6			—			0.1
Effective tax rate		33.9	%		32.9	%		38.0	%		23.3	%

The effective tax rates for the three months ended June 30, 2011 and 2010 included the cumulative effect of changes to our annual estimated effective tax rate from prior quarters.

The effective tax rate for the three months ended June 30, 2011 included a benefit of $1.6 million related to the remeasurement of deferred taxes due to a change in state tax law implemented during the second quarter, which had a favorable impact to our state apportionment allocation and a $0.7 million expense associated with the finalization of our 2010 Canadian income tax returns.  The effective tax rate for the six months ended June 30, 2011 included a benefit of $4.9 million related to remeasurement of deferred taxes due to an increase in state tax effective rates and included a deferred tax expense of $76.0 million related to the tax effect of the gain recorded on the remeasurement of our previously held 50% equity interest in SunBelt.  The effective tax rate for the three and six months ended June 30, 2010 included an expense of $0.1 million and a benefit of $1.4 million, respectively, related to changes in the valuation allowance recorded against the foreign tax credit carryforward deferred tax asset generated by our Canadian operations.

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As of June 30, 2011, we had $41.7 million of gross unrecognized tax benefits, which would have a net $39.5 million impact on the effective tax rate, if recognized.  As of June 30, 2010, we had $48.8 million of gross unrecognized tax benefits, of which $46.4 million would have impacted the effective tax rate, if recognized.  The amount of unrecognized tax benefits was as follows:

	June 30,
	2011		2010
	($ in millions)
Balance at beginning of year	$	41.5	$	50.8
Increases for prior year tax positions		0.2		0.2
Decreases for prior year tax positions		—		(0.3	)
Increases for current year tax positions		—		0.2
Reductions due to statute of limitations		—		(2.1	)
Balance at end of period	$	41.7	$	48.8

As of June 30, 2011, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $8.8 million over the next twelve months.  The anticipated reduction primarily relates to settlements with taxing authorities and the expiration of federal, state, and foreign statutes of limitation.

We operate primarily in North America and file income tax returns in numerous jurisdictions.  Our tax returns are subject to examination by various federal, state and local tax authorities.  For our primary tax jurisdictions, the tax years that remain subject to examination are as follows:

	Tax Years
U.S. federal income tax	2007 – 2010
U.S. state income tax	2004 – 2010
Canadian federal income tax	2006 – 2010
Canadian provincial income tax	2006 – 2010

During third quarter 2010, the IRS completed an audit of our U.S. income tax return for 2006.  During second quarter 2010, the Canada Revenue Agency completed an audit of a portion of our Canadian tax returns for the 2005 to 2007 tax years.  No issues arose under either the U.S. audit or the Canadian audit that required an additional tax liability to be recognized.  We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position.