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 35.0% to income before taxes.



	Three Months Ended March 31,
Effective Tax Rate Reconciliation (Percent)	2014		2013
Statutory federal tax rate	35.0	%	35.0	%
Foreign rate differential	(0.1	)	(0.1	)
Domestic manufacturing/export tax incentive	(2.1	)	(1.1	)
Dividends paid to CEOP	(0.3	)	(0.4	)
Remeasurement of deferred taxes	(0.3	)	—
Change in valuation allowance	4.2		—
State income taxes, net	2.4		2.9
Other, net	—		0.2
Effective tax rate	38.8	%	36.5	%

The effective tax rate for the three months ended March 31, 2014 included $1.6 million of expense primarily associated with increases in valuation allowances on certain state tax credit carryforwards associated with a change in a state tax law.

As of March 31, 2014, we had $34.3 million of gross unrecognized tax benefits, which would have a net $30.4 million impact on the effective tax rate, if recognized. As of March 31, 2013, we had $40.1 million of gross unrecognized tax benefits, of which $38.4 million would have impacted the effective tax rate, if recognized. The amount of unrecognized tax benefits was as follows:



	March 31,
	2014			2013
	($ in millions)
Balance at beginning of year	$	34.5		$	40.1
Settlement with taxing authorities	(0.2		)	—
Balance at end of period	$	34.3		$	40.1

As of March 31, 2014, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $5.4 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. Our U.S. federal income tax returns are under examination by the Internal Revenue Service (IRS) for tax years 2008, 2010 and 2011. Our Canadian federal income tax returns are under examination by Canada Revenue Authority (CRA) for tax years 2010 and 2011. Our Canadian provincial income tax returns are under examination by Quebec Revenue Authority for tax years 2008 to 2011. We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued positions. For our primary tax jurisdictions, the tax years that remain subject to examination are as follows:



	Tax Years
U.S. federal income tax	2008; 2010 – 2013
U.S. state income tax	2006 – 2013
Canadian federal income tax	2009 – 2013
Canadian provincial income tax	2008 – 2013