v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
Income Taxes

Note 14 — Income Taxes

Income tax expense consists of:

 

                         
    For the Year  
    2011     2010     2009  
    (In thousands)  

Current tax provision:

                        

U.S. Federal

   $ (27,442 )    $ (7,582 )    $ (51,210 ) 

State and other

     (3,013 )      (1,252 )      (7,031 ) 
   

 

 

    

 

 

    

 

 

  
      (30,455 )      (8,834 )      (58,241 ) 

Deferred tax provision:

                        

U.S. Federal

     26,264       6,084       21,639  

State and other

     1,170       280       969  
   

 

 

    

 

 

    

 

 

  
      27,434       6,364       22,608  
   

 

 

    

 

 

    

 

 

  

Income tax expense

   $ (3,021 )    $ (2,470 )    $ (35,633 ) 
   

 

 

    

 

 

    

 

 

  

Our income tax expense reflects a benefit of $901,000 in 2009 from a federal income tax rate change for qualified timber gains pursuant to the Food, Conservation and Energy Act of 2008.

 

A reconciliation of the federal statutory rate to the effective income tax rate on continuing operations follows:

 

                         
    For the Year  
    2011     2010     2009  

Federal statutory rate

     35  %      35  %      35  % 

State, net of federal benefit

     10       8       4  

Noncontrolling interests

     (6 )      (3 )      (1 ) 

Charitable contributions

     (6 )      (5 )      —  

Compensation

     —       3       —  

Percentage depletion

     (8 )      (10 )      —  

Qualified timber gains

     —       —       (1 ) 

Other

     —       2       —  
   

 

 

    

 

 

    

 

 

  

Effective tax rate

     25  %      30  %      37  % 
   

 

 

    

 

 

    

 

 

  

Significant components of deferred taxes are:

 

                 
    At Year-End  
    2011     2010  
    (In thousands)  

Deferred Tax Assets:

                

Real estate

   $ 74,970     $ 57,419  

Employee benefits

     11,284       10,686  

Accruals not deductible until paid

     1,113       1,013  
   

 

 

    

 

 

  

Gross deferred tax assets

     87,367       69,118  

Deferred Tax Liabilities:

                

Undeveloped land

     (8,479 )      (14,174 ) 

Income producing properties

     (4,093 )      (5,069 ) 

Timber

     (1,853 )      (2,734 ) 
   

 

 

    

 

 

  

Gross deferred tax liabilities

     (14,425 )      (21,977 ) 
   

 

 

    

 

 

  

Net Deferred Tax Asset

   $ 72,942     $ 47,141  
   

 

 

    

 

 

  

In 2010, deferred tax liabilities associated with income producing properties increased principally due to the deferral under IRC Section 1031 of about $20,700,000 in gains from the sale of timber and timberland. We used $23,045,000 of the proceeds held by a qualified intermediary and $26,500,000 of non-recourse borrowings to fund the acquisition of a 401 unit, Class A multifamily property. These transactions resulted in a deferred tax liability of $7,448,000.

We file income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. In 2011, the Internal Revenue Service (IRS) completed its examination of our 2008 and 2007 (one day of operations) federal income tax returns. No changes were made to these returns as a result of the examination.

Prior to our spin-off, we were included in Temple-Inland’s consolidated income tax returns. In conjunction with our spin-off, we entered into an agreement with Temple-Inland whereby we agreed to indemnify Temple-Inland for any adjustments related to our tax positions reported in their pre-spin income tax returns. With few exceptions, we are no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2006. In 2009, Temple-Inland informed us that the IRS began an examination of its 2007 and 2006 federal income tax returns. This examination is still in process as of year-end 2011 but we were informed that the IRS has not proposed any adjustments affecting our reported tax positions.

 

A reconciliation of the beginning and ending amount of tax benefits not recognized for book purposes is as follows:

 

                         
    At Year-End  
    2011     2010     2009  
    (In thousands)  

Balance at beginning of year

   $ 7,394     $ 7,441     $ —  

Additions based on tax positions related to the current year

     —       —       7,441  

Additions for tax positions of prior years

     —       —       —  

Reductions for tax positions of prior years

     (1,563 )      (47 )      —  

Settlements

     —       —       —  
   

 

 

    

 

 

    

 

 

  

Balance at end of year

   $ 5,831     $ 7,394     $ 7,441  
   

 

 

    

 

 

    

 

 

  

At year-end 2011, 2010 and 2009, there were $5,831,000, $6,019,000 and 6,066,000 of tax benefits not recognized for book purposes that would affect the annual effective tax rate, if recognized.

We recognize interest accrued related to unrecognized tax benefits in income tax expense. In 2011, 2010 and 2009, we recognized approximately $41,000, $133,000 and $96,000 in interest. At year-end 2011, 2010 and 2009, we have $269,000, $229,000 and $96,000 of accrued interest and no penalties.