Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes [Abstract]

Income Taxes

Note 11. Income Taxes

The provision for income taxes results in effective tax rates different from the statutory rates. The following is a reconciliation between the statutory United States Federal income tax rate and the Company’s effective income tax rate:

	Three Months Ended
	March 31,
	2012			2011
Statutory rate		35.0	%		35.0	%
State taxes		1.9			2.4
Changes in tax reserves, net of settlements		(4.6	)		1.2
Other, net		0.6			0.2
Effective rate		32.9	%		38.8	%

During the first quarter of 2012, we settled our audit with the Internal Revenue Service (“IRS”) for the 2004-2005 tax years. As a result of closing this audit, we recognized a $3.5 million tax benefit primarily related to favorable claims filed and approved by the IRS in the final audit settlement. The statute of limitations for this audit cycle will remain open until September 30, 2012.

In addition, we are currently under examination by the IRS for the years ended December 31, 2006 through 2008. Certain issues have been tentatively agreed upon by us and the IRS and certain issues will be challenged by us. We expect to settle all 2006-2008 issues within the next 12 months except for any potential transfer pricing adjustments. Due to the length of the appeals process, we cannot determine when the 2006-2008 cycle will close. Thus, we are unable to determine how long the statute of limitations for years after December 31, 2005 will remain open.

We have various subsidiaries in Mexico which file separate tax returns and thus are subject to examination by taxing authorities at different times. The 2003 tax year of one of our Mexican subsidiaries is still under review and its statute of limitations remains open through June 2014. Another Mexican subsidiary’s 2005 statute remains open through July 2013. The remaining entities are open for their 2006 tax years and forward.

Our various European subsidiaries, including subsidiaries that were sold in 2006, are impacted by various statutes of limitations. The statute of limitations for our discontinued operations in Romania, the Czech Republic, Slovakia, and Switzerland through the year of disposition are now closed. Our two remaining Swiss subsidiaries, one of which is a holding company and the other which is dormant, have been audited by the taxing authorities through 2008 and 2009. The statute of limitations in Switzerland is generally five years from the end of the tax year, but can be extended up to 15 years in certain cases if the audit has commenced during the original five year period.

We also currently have sales offices in Europe and Canada that are subject to various statutes.

Generally, states’ statutes of limitations in the United States are open from 2003 forward due to the use of tax loss carryforwards in certain jurisdictions.

The change in unrecognized tax benefits for the three months ended March 31, 2012 and 2011 was as follows:

	Three Months Ended
	March 31,
	2012			2011
	(in millions)
Beginning balance	$	52.5		$	36.8
Additions for tax positions related to the current year		1.0			0.9
Additions for tax positions of prior years		—			2.6
Reductions for tax positions of prior years		(1.1	)		—
Settlements		(3.0	)		—
Expiration of statute of limitations		(0.1	)		(0.1	)
Ending balance	$	49.3		$	40.2

Additions for tax positions related to the current year in the amounts of $1.0 million and $0.9 million recorded in the three months ended March 31, 2012 and 2011, respectively, were amounts provided for tax positions that will be taken for Federal and state income tax purposes when we file the 2012 tax returns.

Additions for tax positions of prior years for the three months ended March 31, 2011 of $2.6 million are primarily due to Federal tax positions taken on prior year returns that have been proposed by the IRS but not previously reserved. These items are primarily timing differences and thus we would be allowed a future tax deduction. During 2011, we recorded a corresponding deferred tax asset for the future reduction of taxes related to these adjustments.

The reduction in tax positions of prior years of $1.1 million for the three months ended March 31, 2012, was primarily related to new guidance issued by the IRS regarding the capitalization of fixed assets that was issued in March 2012 as well as state taxes.

Settlements during the three months ended March 31, 2012, primarily related to the settlement of our 2004-2005 IRS audit.

The total amount of unrecognized tax benefits including interest and penalties at March 31, 2012 and 2011, that would affect the Company’s effective tax rate if recognized was $17.5 million and $14.8 million, respectively. There is a reasonable possibility that unrecognized Federal and state tax benefits will decrease by March 31, 2013 due to a lapse in the statute of limitations for assessing tax. Amounts subject to a lapse in statute by March 31, 2013 total $5.6 million. Further, there is a reasonable possibility that the unrecognized Federal tax benefits will decrease by March 31, 2013 due to settlements with taxing authorities. Amounts expected to settle by March 31, 2013 total $26.0 million.

Trinity accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of March 31, 2012 and December 31, 2011 was $12.4 million and $13.3 million, respectively. Income tax expense for the three months ended March 31, 2012, included a decrease in income tax expense of $0.9 million in interest expense and penalties related to uncertain tax positions. Income tax expense for the three months ended March 31, 2011, included a decrease in income tax expense of $0.9 million in interest expense and penalties related to uncertain tax positions.