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Income Taxes
9 Months Ended
Sep. 30, 2011
Income Taxes [Abstract] 
Income Tax Disclosure [Text Block]
Income Taxes.
For the three months ended September 30, 2011, we recorded an income tax provision of $13 million on pre-tax loss of $39 million compared to an income tax provision of $7 million on pre-tax income of $772 million for the three months ended September 30, 2010. Our effective income tax rate was (33.3)% and 0.9% for the three months ended September 30, 2011 and 2010, respectively.
For the nine months ended September 30, 2011, we recorded an income tax provision of $55 million on pre-tax income of $1,183 million compared to an income tax provision of $19 million on pre-tax income of $512 million for the nine months ended September 30, 2010. Our effective income tax rate was 4.6% and 3.7% for the nine months ended September 30, 2011 and 2010, respectively.
The difference between the effective tax rate and statutory federal rate of 35% is principally due to changes in valuation allowances and partnership income not subject to taxation, as such taxes are the responsibility of the partners.
Federal-Mogul believes that it is reasonably possible that its unrecognized tax benefits in multiple jurisdictions, which primarily relates to transfer pricing, corporate reorganization and various other matters, may decrease by approximately $349 million within the next 12 months due to audit settlements or statute expirations, of which approximately $55 million, if recognized, could impact the effective tax rate.
In conjunction with Federal-Mogul's ongoing review of its actual results and anticipated future earnings, it reassesses the possibility of releasing valuation allowances. Based upon this assessment, Federal-Mogul has concluded that there is more than a remote possibility that existing valuation allowances in certain jurisdictions of up to $230 million as of September 30, 2011 could be released within the next 12 months. If releases of such valuation allowances occur, it may have a significant impact on net income in the quarter in which it is deemed appropriate to release the reserve.