9.	INCOME TAXES

The following table presents the 2013, 2012 and 2011 income tax expense (benefit):


	Year Ended December 31
	2013(1)			2012(2)			2011(3)
	(In thousands)
Current income taxes:
Federal	$	(52,601	)	$	77,909		$	(31,584	)
State		(9,477	)		18,400			762
Foreign		6			538			168

Total current income tax expense (benefit)		(62,072	)		96,847			(30,654	)
Deferred income taxes:
Federal		15,051			(631	)		(416,478	)
State		4,696			(8,271	)		(76,423	)

Total deferred income tax expense (benefit)		19,747			(8,902	)		(492,901	)

Total income tax expense (benefit)	$	(42,325	)	$	87,945		$	(523,555	)

(1)	Excludes $431.0 million in income tax expense related to discontinued operations.

(2)	Excludes $80.4 million in income tax expense related to discontinued operations.

(3)	Excludes $67.2 million in income tax expense related to discontinued operations.

The following is a reconciliation of income tax expense (benefit) computed at the U.S. federal statutory tax rate to income tax expense (benefit) reported in our Consolidated Statements of Operations:


	Year Ended December 31
	2013						2012					2011
	Amount			Percentage			Amount		Percentage			Amount			Percentage
	(In thousands, except percentages)
Tax expense at statutory rate	$	99,062			35.0	%	$	39,116		35.0	%	$	(788,143	)		35.0	%
State income taxes		(3,107	)		(1.1	)		6,584		5.9			(49,180	)		2.2
Tax-free disposition of investment		(145,524	)		(51.4	)		—		—			—			—
Uncertain tax position		6,106			2.2			—		—			—			—
Sale of unconsolidated affiliate		(545	)		(0.2	)		40,411		36.2			—			—
Nondeductible goodwill		—			—			—		—			305,657			(13.5	)
Other		1,683			0.6			1,834		1.6			8,111			(0.4	)

Total	$	(42,325	)		(14.9	)%	$	87,945		78.7	%	$	(523,555	)		23.3	%

The tax effects of temporary differences giving rise to deferred income tax assets (liabilities) were:


	December 31
	2013(1)			2012(2)
	(In thousands)
Deferred income tax assets:
Accrued liabilities	$	121,539		$	152,501
Retirement plans and postretirement benefits		24,312			52,981
Share-based compensation		20,468			34,325
Receivables and inventories		10,275			14,268
Derivative instruments		283			10,909
State net operating loss carryforwards		31,824			30,621
State tax credit carryforwards		3,007			8,307
Valuation allowances		(8,733	)		(7,570	)

		202,975			296,342
Deferred income tax liabilities:
Property, plant and equipment		(199,004	)		(243,849	)
Intangible assets		(8,751	)		(22,484	)
Other		(145	)		(6,125	)

		(207,900	)		(272,458	)

Net deferred income tax asset (liability)	$	(4,925	)	$	23,884

(1)	Includes $7.5 million of deferred tax assets related to uncertain tax positions.

(2)	Includes $11.7 million of deferred tax assets related to uncertain tax positions.

These net deferred income tax assets (liabilities) are classified in our Consolidated Balance Sheets as follows:


	December 31
	2013			2012
	(In thousands)
Current assets	$	60,143		$	78,861
Noncurrent assets		35,623			49,858
Noncurrent liabilities		(100,691	)		(104,835	)

Total	$	(4,925	)	$	23,884

At December 31, 2013, we had $31.8 million of tax-effected state net operating losses and $3.0 million of state tax credits available for carryover to future years. These items are subject to certain limitations and begin to expire in 2014. A valuation allowance of $8.7 million has been established because we do not believe it is more likely than not that all of the deferred tax assets related to these items will be realized prior to expiration. Our valuation allowance increased $1.2 million in 2013 primarily due to certain state tax credits no longer expected to be utilized subsequent to the divestiture of our Morningstar division.

On September 13, 2013, the U.S. Treasury Department issued final income tax regulations on the deduction and capitalization of expenditures related to tangible property. These final regulations are generally effective for tax years beginning on or after January 1, 2014. Several of the provisions within the regulations will require tax accounting method changes to be filed with the IRS; however, we do not expect the method changes to have a material impact on our Consolidated Financial Statements.

The following is a reconciliation of gross unrecognized tax benefits, including interest, recorded in our Consolidated Balance Sheets:


	December 31
	2013			2012			2011
	(In thousands)
Balance at beginning of year	$	27,734		$	29,128		$	18,302
Increases in tax positions for current year		18,230			230			14,759
Increases in tax positions for prior years		2,315			5,075			2,594
Decreases in tax positions for prior years		(6,192	)		(3,697	)		(1,872	)
Settlement of tax matters		(1,232	)		(2,127	)		(3,369	)
Lapse of applicable statutes of limitations		(377	)		(875	)		(1,286	)

Balance at end of year	$	40,478		$	27,734		$	29,128

These unrecognized tax benefits are classified in our Consolidated Balance Sheets as follows:


	December 31
	2013		2012		2011
	(In thousands)
Accrued expenses	$	3,348	$	1,427	$	3,744
Other long-term liabilities		37,130		26,307		25,384

Total	$	40,478	$	27,734	$	29,128

Of the balance at December 31, 2013, $21.3 million would impact our effective tax rate and $11.7 million would be recorded in discontinued operations, if recognized. The remaining $7.5 million represents tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Due to the impact of deferred income tax accounting, the disallowance of the shorter deductibility period would not affect our effective tax rate but would accelerate payment of cash to the applicable taxing authority. Due to the anticipated resolution of several uncertain tax positions, we expect our liability for uncertain tax positions to decrease by approximately $15 million to $23 million during the next 12 months.

We recognize accrued interest related to uncertain tax positions as a component of income tax expense. Penalties, if incurred, are recorded in general and administrative expenses in our Consolidated Statements of Operations. Interest expense recorded in income tax expense for 2013, 2012 and 2011was immaterial. Our liability for uncertain tax positions included accrued interest of $2.0 million and $2.6 million at December 31, 2013 and 2012, respectively.

As of December 31, 2013, the Internal Revenue Service (“IRS”) had completed their examination of our 2007 through 2011 U.S. consolidated income tax returns. There are no items under dispute related to this examination. The IRS has submitted its report to the U.S. Congressional Joint Committee on Taxation (“Joint Committee”) for approval of a refund. Once the Joint Committee completes its review, the IRS will officially close the examination of those years. Our 2012 U.S. consolidated income tax return remains open for examination. State income tax returns are generally subject to examination for a period of three to five years after filing. We have various state income tax returns in the process of examination, appeals or settlement.