14.	Income Taxes

The components of pre-tax book income (loss) consist of the following:
	Year Ended December 31,
	2011			2010		2009
U.S.	$	(22,865	)	$	37,487	$	(114,273	)
Foreign		45,104			30,059		(35,870	)
Total	$	22,239		$	67,546	$	(150,143	)

Significant components of the income tax expense (benefit) consist of the following:
	Year Ended December 31,
	2011			2009			2008
Current:
U.S. federal current expense (benefit)	$	(22	)	$	191		$	(22,166	)
State current expense (benefit)		1,395			(1,047	)		(1,294	)
Foreign current expense (benefit)		13,467			11,485			(2,123	)
Total current expense (benefit)		14,840			10,629			(25,583	)
Deferred:
U.S. federal deferred expense (benefit)		(5,772	)		(2,945	)		(3,024	)
State deferred expense (benefit)		-			(75	)		677
Foreign deferred tax expense		5,291			3,524			15,573
Total deferred expense (benefit)		(481	)		504			13,226
Total income tax expense (benefit)	$	14,359		$	11,133		$	(12,357	)

A reconciliation of the statutory U.S. Federal income tax rate to the effective income tax rate on income (loss) is as follows:
	2011			2010			2009
Federal Statutory Rate		35.0	%		35.0	%		35.0	%
Permanent differences		38.2			(9.8	)		(1.0	)
State taxes, net of Federal benefit		6.3			(1.7	)		7.6
Foreign earnings taxed at different rates than U.S.		(93.9	)		(27.8	)		3.0
Equity earnings in joint ventures		-			-			1.7
Unremitted earnings		33.6			7.3			10.7
Valuation allowance		65.8			22.7			(57.0	)
Changes in uncertain tax reserves		5.6			(5.1	)		8.2
Other		(26.0	)		(4.1	)		-
Effective tax rate		64.6	%		16.5	%		8.2	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of December 31 are as follows:

	2011			2010
Deferred tax assets:
Accrued postretirement benefit cost	$	8,281		$	8,690
Accrued liabilities		3,308			11,963
Share-based compensation		3,758			4,169
Derivative and hedging contracts		103,048			25,157
Goodwill		17,551			20,760
Equity contra - other comprehensive loss		77,142			55,810
Capital losses		7,506			7,802
Net operating losses		619,357			675,427
Other		55			39
Total deferred tax assets		840,006			809,817
Valuation allowance		(773,714	)		(714,423	)
Net deferred tax assets	$	66,292		$	95,394
Deferred tax liabilities:
Tax over financial statement depreciation	$	(147,021	)	$	(152,204	)
Pension		(7,021	)		(1,311	)
Income from domestic partnership		4			3
Unremitted foreign earnings		-			(23,560	)
Foreign basis differences		(3,212	)		(4,321	)
Total deferred tax liabilities		(157,250	)		(181,393	)
Net deferred tax liability	$	(90,958	)	$	(85,999	)

Our net deferred tax liabilities at December 31, 2011 and December 31, 2010, respectively, are comprised of our foreign deferred income tax liability.

Under ASC 740, “Accounting for Income Taxes”, a valuation allowance must be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The amount of valuation allowance is based upon our best estimate of our ability to realize the net deferred tax assets. A valuation allowance can subsequently be reversed when we believe that the assets are realizable on a more likely than not basis. The valuation allowance increases are primarily due to U.S. and foreign operating income and losses generated in jurisdictions where a full valuation allowance has been recorded.

The changes in the allowance allowances are as follows:

	2011		2010
Beginning balance, valuation allowance	$	714,423	$	681,094
Change in valuation allowance		59,291		33,329
Ending balance, valuation allowance	$	773,714	$	714,423

The significant components of our NOL carryforwards are as follows:

	2011		2010
Federal (1)	$	1,447,616	$	1,691,172
State (2)		1,450,934		1,133,249
Icelandic (3)		298,113		185,881

(1)	The federal NOL begins to expire in 2028.
(2)	The state NOL begins to expire in 2027.
(3)	The Icelandic NOL begins to expire in 2016.

We have removed our election to permanently reinvest foreign earnings for 2011, 2010, and 2009. The cumulative amount of foreign undistributed net earnings for which no deferred taxes have been provided was $159,087 at December 31, 2011. Management has no plans to distribute such earnings in the foreseeable future.

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest) is as follows:

	2011			2010			2009
Balance as of January 1,	$	16,600		$	21,200		$	21,600
Additions based on tax positions related to the current year		2,500			4,400			5,200
Reductions based on tax positions related to the current year		-			-			-
Additions based on tax positions of prior years		-			-			-
Reductions for tax positions of prior years		-			-			(4,600	)
Decreases due to lapse of applicable statute of limitations		(3,200	)		(9,000	)		(700	)
Settlements		-			-			(300	)
Balance as of December 31,	$	15,900		$	16,600		$	21,200

Included in the above balances are tax positions whose tax characterization is highly certain but for which there is uncertainty about the timing of tax return inclusion. Because of the impact of deferred tax accounting, other than interest and penalties, the timing would not impact the annual effective tax rate but could accelerate the payment of cash to the taxing authority to an earlier period. The remaining amounts of unrecognized tax benefits would affect our effective tax rate if recognized. It is our policy to recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The components of our unrecognized tax positions are as follows:

	2011		2010		2009
Highly certain tax positions	$	15,100	$	14,600	$	17,400
Other unrecognized tax benefits		800		2,000		4,600
Gross unrecognized tax benefits	$	15,900	$	16,600	$	21,200
Accrued interest and penalties related to unrecognized tax benefits	$	100	$	300	$	1,700

Century and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and several foreign jurisdictions.

Our federal income tax returns beginning in 2008 are subject to examination. Our 2008 tax year is currently under audit by the Internal Revenue Service (“IRS”). Additionally, a 2005 amended return is also under audit with respect to carry back items. Material state and local income tax matters have been concluded for years through 2002. The majority of our other state returns beginning in 2005 are subject to examination. Our Icelandic tax returns are subject to examination beginning with the 2005 tax year.

We do not expect a significant change in the balance of unrecognized tax benefits within the next twelve months.