10. INCOME TAXES

The components of pretax (loss) income from continuing operations for the quarters and years to date ended September 30, 2012 and 2011 are as follows:


	For the Quarters Ended September 30,						For the Years to Date Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
U.S.	$	(39,609	)	$	25,753		$	(109,274	)	$	205,454
Foreign		(7,897	)		(5,470	)		900			5,210

Total	$	(47,506	)	$	20,283		$	(108,374	)	$	210,664

The determination of the annual effective tax is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the ongoing development of tax planning strategies during the year. In addition, our provision for income taxes can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following is a summary of our income tax (benefit) provision and effective tax rate from continuing operations:


	For the Quarters Ended September 30,						For the Years to Date Ended September 30,
	2012			2011			2012			2011
	(Dollars in thousands)
Pretax (loss) income	$	(47,506	)	$	20,283		$	(108,374	)	$	210,664
Income tax (benefit) provision	$	(16,675	)	$	6,215		$	(30,109	)	$	72,582
Effective tax rate		35.1	%		30.6	%		27.8	%		34.5	%

The increase in the effective tax rate for the quarter ended September 30, 2012 as compared to the prior year quarter was primarily due to the inclusion of a $2.6 million favorable tax adjustment related to the expiration of the statute of limitations on a federal tax exposure, which was partially offset by an increase in the relative percentage of operating income that our foreign and not-for-profit institutions will contribute to our consolidated results of operations; both of which reduce the consolidated effective tax rate. Additionally, the rate is also impacted by various state income tax valuation allowances due to the change of forecasted earnings for some legal entities.

The decrease in the effective tax rate for the year to date ended September 30, 2012 as compared to the prior year was primarily due to the write-off of non-deductible goodwill and an increase in the relative percentage of operating income that our foreign and not-for-profit institutions will contribute to our consolidated results of operations. Additionally, the rate is also impacted by various state income tax valuation allowances due to the change of forecasted earnings for some legal entities. The current year to date effective tax rate also included $4.6 million in favorable tax adjustments related to the resolution of various state tax exposures and the expiration of the statute of limitations on other federal and state tax exposures which reduced our effective tax rate by 4.3%. The prior year to date effective tax rate included $1.6 million in favorable tax adjustments related to the correction of an error in previously filed U.S. income tax returns associated with the treatment of foreign interest income which reduced our effective tax rate by 0.7% for the year to date ended September 30, 2011.

We estimate that it is reasonably possible that the liability for unrecognized tax benefits for a variety of uncertain tax positions will decrease by up to $1.7 million in the next twelve months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. The income tax rate for the quarter and year to date ended September 30, 2012 does not take into account the possible reduction of the liability for unrecognized tax benefits. The impact of a reduction to the liability will be treated as a discrete item in the period the reduction occurs. We recognize interest and penalties related to unrecognized tax benefits in tax expense. As of September 30, 2012, we had accrued $3.6 million as an estimate for reasonably possible interest and accrued penalties.

Our tax returns are routinely examined by federal, state and foreign tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service completed its examination of our U.S. income tax returns through our tax year ended December 31, 2007.