15.

INCOME TAXES

Following is an analysis of the components of the consolidated income tax provision:


	2011			2010			2009
	(In thousands)
Current —
U.S.	$	41,452		$	44,595		$	52,704
State and local		16,678			23,653			12,191

Total current provision for taxes		58,130			68,248			64,895

Deferred —
U.S.		29,895			(117,945	)		(11,745	)
State and local		(2,548	)		(2,634	)		(2,074	)

Total deferred provision for taxes		27,347			(120,579	)		(13,819	)

Total provision (benefit) for taxes	$	85,477		$	(52,331	)	$	51,076

The effective tax rate varies from the U.S. Federal statutory tax rate principally due to the following:


	2011			2010			2009
	(In thousands)
Provision computed at U.S. Federal statutory rate of 35%	$	85,226		$	53,586		$	110,939
Alternative fuel mixture and cellulosic biofuel producer credits		—			(104,785	)		(61,673	)
State and local taxes, net of federal benefit		7,504			7,694			4,566
Domestic manufacturers deduction		(7,670	)		(7,540	)		(2,956	)
Other		417			(1,286	)		200

Total	$	85,477		$	(52,331	)	$	51,076

The $104.8 million benefit in 2010 includes the reallocation of gallons from the alternative fuel mixture credit to the cellulosic biofuel producer credit claimed in the 2009 federal tax return, and includes a reserve for uncertain tax positions of $102.0 million. For further discussion regarding the alternative fuel mixture and cellulosic biofuel producer credits recorded during 2010 and 2009, see Note 16.

Deferred income tax assets and liabilities at December 31 are summarized as follows:


	December 31,
	2011			2010
	(In thousands)
Deferred tax assets:
Accrued liabilities	$	5,287		$	6,538
Employee benefits and compensation		15,100			15,794
Inventories		6,809			4,758
Stock options and restricted stock		8,596			7,485
Pension and postretirement benefits		60,455			41,930
Derivatives		15,072			—
Cellulosic biofuel tax credit carryforward		167,452			200,334

Total deferred tax assets	$	278,771		$	276,839

Deferred tax liabilities:
Property, plant and equipment	$	(216,109	)	$	(225,620	)
Goodwill and intangible assets		(10,676	)		(8,174	)
Investment in joint venture		(1,121	)		(1,049	)
Derivatives		—			(954	)

Total deferred tax liabilities	$	(227,906	)	$	(235,797	)

Net deferred tax assets	$	50,865		$	41,042

The net deferred tax assets (liabilities) at December 31 are classified in the balance sheet as follows:


	December 31,
	2011			2010
	(In thousands)
Current deferred tax assets	$	62,789		$	50,232
Non-current deferred tax liabilities		(11,924	)		(9,190	)

Net deferred tax assets	$	50,865		$	41,042

Cash payments for income taxes were $52.7 million, $19.1 million and $22.3 million for the years ended December 31, 2011, 2010 and 2009, respectively.

As of December 31, 2011, the Company had federal income tax credit carryforwards included in deferred taxes of $167.5 million which can be used to offset federal taxes payable through December 31, 2015. The $167.5 million recognizes the full benefit of federal tax credit carryforwards as claimed on PCA's federal tax return for the cellulosic biofuel credits before an adjustment of $102.0 million for uncertain tax positions under ASC 740. The deferred tax asset from the cellulosic biofuel producer credit carryforwards of $167.5 million is described in more detail in Notes 16 and 20.

The following table summarizes the changes related to PCA's gross uncertain tax positions excluding interest:


	2011			2010
	(In thousands)
Balance as of January 1	$	(112,311	)	$	(9,041	)
Increases related to prior years' tax positions		(56	)		(104,721	)
Increases related to current year tax positions		(624	)		(692	)
Settlements with taxing authorities		—			424
Expiration of the statute of limitations		1,978			1,719

Balance at December 31	$	(111,013	)	$	(112,311	)

During the third quarter of 2011, the statue of limitations for the federal tax year of 2007 expired. During the third and fourth quarters of 2011, various state statutes of limitations expired. As a result of these events, the reserve for uncertain tax positions was decreased by $2.0 million gross or $1.3 million net of the federal benefit for state taxes during the third and fourth quarters of 2011. At December 31, 2011, PCA had recorded a $111.0 million reserve for uncertain tax positions excluding interest. Of the total, $106.8 million (net of the federal benefit for state taxes) would impact the effective tax rate if recognized. The increase in reserve in 2010 is attributable to alternative energy tax credits as described in Note 16.

During the years ended December 31, 2011 and 2010, PCA recorded $0.2 million gross ($0.16 million net) and $0.2 million gross ($0.09 million net), respectively, in its statement of income, increasing the accrual for interest to $2.2 million gross ($1.4 million net) and $2.0 million gross ($1.2 million, net) at December 31, 2011 and 2010, respectively. No accrual for penalties was made.

PCA and its subsidiaries are subject to U.S. federal income taxes, as well as income taxes of multiple state and city jurisdictions. A federal examination of the tax years 2002 and 2004 has been concluded. The tax years 2008 — 2011 remain open to federal examination. The tax years 2002 — 2011 remain open to state examinations. During March of 2011, the Internal Revenue Service (IRS) started an audit of PCA's 2008 and 2009 tax years, which includes the cellulosic biofuel producer tax credits claimed in the 2009 federal income tax return. Pending the timing and outcome of the IRS audit, which is not determinable at this time, PCA expects the reserve for uncertain tax positions to change significantly. PCA estimates the change in uncertain tax positions to be between $0 and $104.7 million due to potential changes upon IRS examination.