13.

Income Taxes

Components of the income tax provision applicable to federal, state and foreign income taxes for the years ended December 31, 2012, 2011 and 2010 are as follows (in thousands):


	2012			2011			2010
Federal income tax expense (benefit):
Current	$	(512	)	$	16,336		$	(77,310	)
Deferred		156,003			146,842			145,198

		155,491			163,178			67,888

State income tax expense:
Current		12,455			6,056			19
Deferred		5,483			13,196			3,246

		17,938			19,252			3,265

Foreign income tax expense (benefit):
Current		3,817			6,579			2,657
Deferred		(1,050	)		(1,071	)		(954	)

		2,767			5,508			1,703

Total income tax expense (benefit):
Current		15,760			28,971			(74,634	)
Deferred		160,436			158,967			147,490

Total income tax expense:	$	176,196		$	187,938		$	72,856

The difference between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2012, 2011 and 2010 is summarized as follows:


	2012			2011			2010
Statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes		2.5			2.5			1.1
Permanent differences		(0.2	)		(0.1	)		2.3
Other, net		(0.3	)		(0.6	)		(0.2	)

Effective tax rate		37.0	%		36.8	%		38.2	%

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 9% in 2010 and thereafter on the lesser of qualified production activities income or taxable income. The permanent difference for 2010 reflects the recapture of a portion of this deduction due to the carryback of the 2010 net operating loss to prior years. 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 permanent difference for 2012 does not include any deduction as it is limited to taxable income and the Company does not have taxable income in 2012 due to the utilization of net operating loss carryforwards.

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


	December 31, 2012			Net Change			December 31, 2011			Net Change			December 31, 2010			Net Change			December 31, 2009
Deferred tax assets:
Current:
Net operating loss carryforwards	$	18,914		$	(95,662	)	$	114,576		$	114,576		$	—		$	—		$	—
Workers’ compensation allowance		25,078			1,074			24,004			714			23,290			(1,334	)		24,624
Other		20,451			1,651			18,800			146			18,654			(962	)		19,616

		64,443			(92,937	)		157,380			115,436			41,944			(2,296	)		44,240

Non-current:
Net operating loss carryforwards		11,762			(6,672	)		18,434			11,969			6,465			1,593			4,872
Expense associated with employee stock options		14,672			1,944			12,728			1,476			11,252			2,123			9,129
Federal benefit of foreign deferred tax liabilities		—			—			—			—			—			(9,160	)		9,160
Federal benefit of state deferred tax liabilities		22,022			1,762			20,260			7,105			13,155			3,383			9,772
Other		15,124			4,454			10,670			(5,361	)		16,031			6,546			9,485

		63,580			1,488			62,092			15,189			46,903			4,485			42,418

Total deferred tax assets		128,023			(91,449	)		219,472			130,625			88,847			2,189			86,658

Deferred tax liabilities:
Current:
Other		(11,484	)		3,171			(14,655	)		474			(15,129	)		(3,766	)		(11,363	)

Non-current:
Property and equipment basis difference		(905,597	)		(69,774	)		(835,823	)		(289,168	)		(546,655	)		(133,542	)		(413,113	)
Other		(15,285	)		(2,384	)		(12,901	)		(1,231	)		(11,670	)		(709	)		(10,961	)

		(920,882	)		(72,158	)		(848,724	)		(290,399	)		(558,325	)		(134,251	)		(424,074	)

Total deferred tax liabilities		(932,366	)		(68,987	)		(863,379	)		(289,925	)		(573,454	)		(138,017	)		(435,437	)

Net deferred tax liability	$	(804,343	)	$	(160,436	)	$	(643,907	)	$	(159,300	)	$	(484,607	)	$	(135,828	)	$	(348,779	)

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, 2012 and 2011 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 $35.6 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 has approximately $54.0 million of federal net operating losses and approximately $169.0 million of state net operating losses that can be carried forward as of December 31, 2012. The federal net operating loss that can be carried forward, if unused, would expire in 2031. The state net operating losses that can be carried forward, if unused, are scheduled to expire as follows: 2014 — $4.1 million; 2015 — $12.9 million; 2016 — $8.3 million; 2028 — $14.5 million; 2029 — $29.8 million; 2030 — $17.1 million and 2031 — $82.3 million.

As of December 31, 2012, 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, 2012, the tax years ended December 31, 2009 through December 31, 2011 are open for examination by U.S. taxing authorities. As of December 31, 2012, the tax years ended December 31, 2008 through December 31, 2011 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 $27.8 million as of December 31, 2012. The unrecognized deferred tax liability associated with these earnings was approximately $4.2 million, net of available foreign tax credits. This liability would be recognized if the Company received a dividend of the unremitted earnings.