13.

Income Taxes

Components of the income tax provision applicable to federal, state and foreign income taxes for the years ended December 31, 2011, 2010 and 2009 are as follows (in thousands):


	2011			2010			2009
Federal income tax expense (benefit):
Current	$	16,336		$	(77,310	)	$	(117,493	)
Deferred		146,842			145,198			103,574

		163,178			67,888			(13,919	)

State income tax expense (benefit):
Current		6,056			19			(1,883	)
Deferred		13,196			3,246			(1,875	)

		19,252			3,265			(3,758	)

Foreign income tax expense (benefit):
Current		6,579			2,657			338
Deferred		(1,071	)		(954	)		(256	)

		5,508			1,703			82

Total income tax expense (benefit):
Current		28,971			(74,634	)		(119,038	)
Deferred		158,967			147,490			101,443

Total income tax expense (benefit)	$	187,938		$	72,856		$	(17,595	)

The difference between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2011, 2010 and 2009 is summarized as follows:


	2011			2010			2009
Statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes		2.5			1.1			4.7
Permanent differences		(0.1	)		2.3			(5.7	)
Other, net		(0.6	)		(0.2	)		0.1

Effective tax rate		36.8	%		38.2	%		34.1	%

The Domestic Production Activities Deduction was enacted as part of the American Jobs Creation Act of 2004 (as revised by the Emergency Economic Stabilization Act of 2008,) and allows a deduction of 6% in 2009 and 9% in 2010 and thereafter on the lesser of qualified production activities income or taxable income. The permanent differences for 2010 and 2009 reflect the recapture of a portion of this deduction due to the carryback of the 2010 and 2009 net operating losses to prior years. This recapture resulted in a negative effective rate impact in 2009 due to the Company having a loss before income taxes in that year. The permanent difference for 2011 does not include any deduction as it is limited to taxable income and the Company had a tax loss in 2011.

The tax effect of significant temporary differences representing deferred tax assets and liabilities and changes therein were as follows (in thousands):


	December 31, 2011			Net Change			December 31, 2010			Net Change			December 31, 2009			Net Change			December 31, 2008
Deferred tax assets:
Current:
Net operating loss carryforwards	$	114,576		$	114,576		$	—		$	—		$	—		$	—		$	—
Workers’ compensation allowance		24,004			714			23,290			(1,334	)		24,624			(1,360	)		25,984
Other		18,800			146			18,654			(962	)		19,616			(2,735	)		22,351

		157,380			115,436			41,944			(2,296	)		44,240			(4,095	)		48,335

Non-current:
Net operating loss carryforwards		18,434			11,969			6,465			1,593			4,872			4,872			—
Expense associated with employee stock options		12,728			1,476			11,252			2,123			9,129			2,500			6,629
Federal benefit of foreign deferred tax liabilities		—			—			—			(9,160	)		9,160			(256	)		9,416
Federal benefit of state deferred tax liabilities		20,260			7,105			13,155			3,383			9,772			2,702			7,070
Other		10,670			(5,361	)		16,031			6,546			9,485			4,120			5,365

		62,092			15,189			46,903			4,485			42,418			13,938			28,480

Total deferred tax assets		219,472			130,625			88,847			2,189			86,658			9,843			76,815

Deferred tax liabilities:
Current:
Other		(14,655	)		474			(15,129	)		(3,766	)		(11,363	)		1,044			(12,407	)

Non-current:
Property and equipment basis difference		(835,823	)		(289,168	)		(546,655	)		(133,542	)		(413,113	)		(110,786	)		(302,327	)
Other		(12,901	)		(1,231	)		(11,670	)		(709	)		(10,961	)		(7,091	)		(3,870	)

		(848,724	)		(290,399	)		(558,325	)		(134,251	)		(424,074	)		(117,877	)		(306,197	)

Total deferred tax liabilities		(863,379	)		(289,925	)		(573,454	)		(138,017	)		(435,437	)		(116,833	)		(318,604	)

Net deferred tax liability	$	(643,907	)	$	(159,300	)	$	(484,607	)	$	(135,828	)	$	(348,779	)	$	(106,990	)	$	(241,789	)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company expects the deferred tax assets at December 31, 2011 and 2010 to be realized as a result of the reversal of existing taxable temporary differences giving rise to deferred tax liabilities and the generation of taxable income; therefore, no valuation allowance is considered necessary.

Other deferred tax assets consist primarily of the tax effect of various allowance accounts and tax-deferred expenses expected to generate future tax benefits of approximately $29.5 million. Other deferred tax liabilities consist primarily of the tax effect of receivables from insurance companies and tax-deferred income not yet recognized for tax purposes.

For income tax purposes, the Company generated approximately $327 million of federal net operating losses and approximately $136 million of state net operating losses during the year ended December 31, 2011. Of these amounts, approximately $11.1 million will be carried back to prior years, and the remaining balance can be carried forward to future years along with prior year carryovers in the amount of $118 million. Net operating losses that can be carried forward, if unused, are scheduled to expire as follows: 2014 — $9.6 million; 2015 — $12.9 million; 2016 — $8.2 million; 2018 — $2.4 million; 2028 — $15.3 million; 2029 — $59.8 million; 2030 — $35.7 million and 2031 — $426 million.

As of December 31, 2011, the Company had no unrecognized tax benefits. The Company has established a policy to account for interest and penalties related to uncertain income tax positions as operating expenses. As of December 31, 2011, the tax years ended December 31, 2008 through December 31, 2010 are open for examination by U.S. taxing authorities. As of December 31, 2011, the tax years ended December 31, 2007 through December 31, 2010 are open for examination by Canadian taxing authorities.

On January 1, 2010, the Company converted its Canadian operations from a Canadian branch to a controlled foreign corporation for federal income tax purposes. Because the statutory tax rates in Canada are lower than those in the United States, this transaction triggered a $5.1 million reduction in deferred tax liabilities, which is being amortized as a reduction to deferred income tax expense over the weighted average remaining useful life of the Canadian assets.

As a result of the above conversion, the Company’s Canadian assets are no longer directly subject to United States taxation, provided that the related unremitted earnings are permanently reinvested in Canada. Effective January 1, 2010, the Company has elected to permanently reinvest these unremitted earnings in Canada, and intends to do so for the foreseeable future. As a result, no deferred United States federal or state income taxes have been provided on such unremitted foreign earnings, which totaled approximately $25.2 million as of December 31, 2011.