Note 8 — Income Taxes

We and our subsidiaries, including acquired companies (as of their respective dates of acquisition), file a consolidated U.S. federal income tax return. We believe our recorded assets and liabilities are reasonable; however, tax laws and regulations are subject to interpretation and tax litigation is inherently uncertain, and therefore our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions.

Components of income tax provision (benefit) on continuing operations reflected in the consolidated statements of operations consisted of the following (in thousands):


		Year Ended December 31,
		2013		2012		2011

Current	$	57,128	$	6,572	$	(78,150)
Deferred		(25,516)		(65,730)		41,344
	$	31,612	$	(59,158)	$	(36,806)


Domestic	$	11,615	$	(78,211)	$	(51,590)
Foreign		19,997		19,053		14,784
	$	31,612	$	(59,158)	$	(36,806)

Income taxes have been provided based on the U.S. statutory rate of 35% and at the local statutory rate for each foreign jurisdiction adjusted for items which are allowed as deductions for federal and foreign income tax reporting purposes, but not for book purposes. The primary differences between the statutory rate and our effective rate from continuing operations are as follows:


	Year Ended December 31,
	2013		2012		2011

Statutory rate	35.0	%	35.0	%	35.0	%
Foreign provision	(11.6)		11.2		(291.0)
Effect of Australian reorganization	-		-		(2,984.3)
Other	(1.4)		0.8		(265.0)
Effective rate	22.0	%	47.0	%	(3,505.3)	%

In 2011, we reorganized our Australian operating companies. The reorganization resulted in a recorded net tax benefit of $31.3 million associated with the impairment of our U.S. investment in the Australian subsidiaries.

Deferred income taxes result from the effect of transactions that are recognized in different periods for financial and tax reporting purposes. The nature of these differences and the income tax effect of each as of December 31, 2013 and 2012 are as follows (in thousands):


		2013		2012
Deferred tax liabilities:
Depreciation and depletion	$	169,404	$	336,471
Original Issue Discount on 2025 and 2032 Notes		14,720		13,098
Equity investments in production facilities		84,870		81,082
Prepaid and other		7,556		10,548
Total deferred tax liabilities	$	276,550	$	441,199

Deferred tax assets:
Net operating losses	$	(40,105)	$	(36,981)
Asset retirement obligations		(708)		(70,085)
Reserves, accrued liabilities and other		(44,291)		(35,229)
Total deferred tax assets		(85,104)		(142,295)
Valuation allowance		22,860		16,391

Net deferred tax liabilities	$	214,306	$	315,295

Deferred income tax is presented as:
Current deferred tax assets		(51,573)		(43,942)
Noncurrent deferred tax liabilities		265,879		359,237
Net deferred tax liabilities	$	214,306	$	315,295

At December 31, 2013, our U.S. net operating losses available for carryforward or carryback totaled $49.3 million and our foreign tax credits available for carryforward or carryback totaled $9.8 million. The net operating loss carryforward would expire in 2030, while the foreign tax credit carryforward would expire in 2020. At this time, we anticipate utilizing these tax attributes via carryback claims. At December 31, 2013, we had a $22.9 million valuation allowance related to certain non-U.S. deferred tax assets, primarily net operating losses generated in Australia, as management believed it is more likely than not that we will not be able to utilize the tax benefit. Additional valuation allowances may be made in the future if in management’s opinion it is more likely than not that the tax benefit will not be utilized. Any limitations on our ability to utilize our tax benefit carryforward could result in an increase in our federal income tax liability in future taxable periods.

We consider the undistributed earnings of our principal non-U.S. subsidiaries to be permanently reinvested. At December 31, 2013 and 2012, our principal non-U.S. subsidiaries had accumulated earnings and profits of approximately $202.6 million and $167.9 million, respectively. We have not provided deferred U.S. income tax on the accumulated earnings and profits as we consider them permanently reinvested.

We had $4.7 million related to uncertain tax positions as of December 31, 2013. In 2012, we reversed a $2.8 million long-term liability related to an uncertain tax position that was projected to be included on our 2011 tax return. The tax position was not taken when the 2011 tax return was filed. We account for tax-related interest in interest expense and tax penalties in selling, general and administrative expenses. We charged $0.2 million to income tax expense for interest and penalties accrued in each of 2013, 2012 and 2011, which brought our total liabilities for interest and penalties to $1.3 million and $1.1 million in the accompanying consolidated balance sheets at December 31, 2013 and 2012, respectively. As of December 31, 2013, 2012, and 2011, there were $3.4 million, $3.4 million and $6.2 million, respectively, of unrecognized tax benefits that if recognized would affect the annual effective rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):


		2013		2012		2011

Balance at January 1,	$	4,506	$	7,085	$	4,085
Additions based on tax positions related to current year		-		-		2,785
Additions for tax positions of prior years		217		206		215
Reductions for tax positions of prior years		-		(2,785)		-
Balance at December 31,	$	4,723	$	4,506	$	7,085

We file tax returns in the U.S. and in various state, local and non-U.S. jurisdictions. We anticipate that any potential adjustments to our state, local and non-U.S. jurisdiction tax returns by tax authorities would not have a material impact on our financial position. The tax periods ending December 31, 2010, 2009, 2008, 2007 and 2006 are under examination by the U.S. Internal Revenue Service (“IRS”). The tax periods ended December 31, 2013, 2012 and 2011 remain open to future review and examination by the IRS. In non-U.S. jurisdictions, the open tax periods include 2013, 2012, 2011, 2010 and 2009.