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Income Taxes
3 Months Ended
Mar. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Our quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items within periods presented. The comparison of our effective tax rate between periods is significantly impacted by the level and mix of earnings and losses by tax jurisdiction, foreign income tax rate differentials and amount of permanent book-to-tax differences.
The income tax provision for the three months ended March 31, 2013 was $10 million at an effective tax rate of 19.1%, compared to $21 million at an effective tax rate of 24.8% for the same period in 2012. The decrease in the effective tax rate for the three months ended March 31, 2013 as compared to the same period in 2012 was primarily due to mix of earnings including the impact of realignment efforts and the benefit from a discrete foreign tax refund.
Unrecognized Tax Benefits
We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
The amount of unrecognized tax benefits at March 31, 2013 was $8 million which, if ultimately recognized, will reduce our annual effective tax rate. We do not believe that the unrecognized tax benefits will significantly change within the next twelve months.
We classify interest relating to unrecognized tax benefits as a component of other non-operating expense, net and tax penalties as a component of income tax expense in our Condensed Consolidated Income Statements. As of March 31, 2013, we had $1 million of interest accrued for unrecognized tax benefits.