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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes |
8. | INCOME TAXES
Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The effects of income taxes are measured based on enacted tax laws and rates. The provision for income taxes from operations consisted of the following:
|  | Year Ended December 31 |
In thousands |  | 2013 |  |  | 2012 |  |  | 2011 |
Current taxes |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 625 |  |  | $ | 8,869 |  |  | $ | 6,943 |
State |  |  | (4,365 | ) |  |  | 3,386 |  |  |  | (1,762 | )
Foreign |  |  | 17,268 |  |  |  | 9,516 |  |  |  | 2,637 |
|  |  | 13,528 |  |  |  | 21,771 |  |  |  | 7,818 |
Deferred taxes and other |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (10,973 | ) |  |  | (5,456 | ) |  |  | (3,908 | )
State |  |  | (474 | ) |  |  | (920 | ) |  |  | (286 | )
Foreign |  |  | (38 | ) |  |  | 4,167 |  |  |  | 4,527 |
|  |  | (11,485 | ) |  |  | (2,209 | ) |  |  | 333 |
Income tax provision |  | $ | 2,043 |  |  | $ | 19,562 |  |  | $ | 8,151 |
The amounts set forth above for total deferred taxes and other included a deferred tax benefit of $15.1 million, $2.3 million and $1.5 million in 2013, 2012 and 2011, respectively. Other taxes totaled an expense of $3.6 million, $0.1 million and $1.8 million in 2013, 2012 and 2011, respectively, associated with the deferred tax impact of uncertain tax positions. The following are the domestic and foreign components of pretax income from operations:
|  | Year Ended December 31 |
In thousands |  | 2013 |  |  | 2012 |  |  | 2011 |
United States |  | $ | (3,052 | ) |  | $ | 24,525 |  |  | $ | (991 | )
Foreign |  |  | 72,253 |  |  |  | 54,416 |  |  |  | 51,836 |
Total pretax income |  | $ | 69,201 |  |  | $ | 78,941 |  |  | $ | 50,845 |
A reconciliation between the income tax provision, computed by applying the statutory federal income tax rate of 35% to income before income taxes, and the actual income tax provision is as follows:
|  | Year Ended December 31 |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Federal income tax provision at statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal income tax benefit |  |  | 0.5 |  |  |  | 1.3 |  |  |  | 0.7 |
Foreign income tax rate differential |  |  | (5.4 | ) |  |  | (3.9 | ) |  |  | (6.8 | )
Change in statutory tax rates |  |  | (0.6 | ) |  |  | (0.8 | ) |  |  | 0.9 |
Tax credits |  |  | (4.4 | ) |  |  | (0.5 | ) |  |  | (2.0 | )
Change in unrecognized tax benefits, net |  |  | (22.7 | ) |  |  | 0.4 |  |  |  | (11.6 | )
Cellulosic biofuel credit, net of incremental state tax and manufacturing deduction benefit |  |  | – |  |  |  | (6.1 | ) |  |  | – |
Valuation allowance |  |  | – |  |  |  | – |  |  |  | 3.2 |
Other |  |  | 0.6 |  |  |  | (0.6 | ) |  |  | (3.4 | )
Provision for income taxes |  |  | 3.0 | % |  |  | 24.8 | % |  |  | 16.0 | %
The sources of deferred income taxes were as follows at December 31:
|  | 2013 |  |  | 2012 |
In thousands |  |  | Current Asset (Liability) |  |  |  | Non current Asset (Liability) |  |  |  | Current Asset (Liability) |  |  |  | Non current Asset (Liability) |
Reserves |  | $ | 5,001 |  |  | $ | 7,919 |  |  | $ | 6,871 |  |  | $ | 8,095 |
Compensation |  |  | 3,111 |  |  |  | 5,000 |  |  |  | 3,332 |  |  |  | 5,034 |
Post-retirement benefits |  |  | 1,070 |  |  |  | 19,819 |  |  |  | 1,285 |  |  |  | 22,642 |
Property |  |  | – |  |  |  | (98,889 | ) |  |  | – |  |  |  | (92,144 | )
Intangible Assets |  |  | – |  |  |  | (28,918 | ) |  |  | – |  |  |  | (1,603 | )
Pension |  |  | 802 |  |  |  | (51,148 | ) |  |  | 508 |  |  |  | (14,681 | )
Inventories |  |  | 1,491 |  |  |  | – |  |  |  | 1,447 |  |  |  | – |
Other |  |  | 893 |  |  |  | 2,377 |  |  |  | 204 |  |  |  | 2,578 |
Tax carryforwards |  |  | 10,322 |  |  |  | 16,922 |  |  |  | 5,218 |  |  |  | 43,409 |
Subtotal |  |  | 22,690 |  |  |  | (126,918 | ) |  |  | 18,865 |  |  |  | (26,670 | )
Valuation allowance |  |  | (1,255 | ) |  |  | (4,905 | ) |  |  | (3,233 | ) |  |  | (27,266 | )
Total |  | $ | 21,435 |  |  | $ | (131,823 | ) |  | $ | 15,632 |  |  | $ | (53,936 | )
Current and non-current deferred tax assets and liabilities are included in the following balance sheet captions:
|  | December 31 |
In thousands |  |  | 2013 |  |  |  | 2012 |
Prepaid expenses and |  |  |  |  |  |  |  |
other current assets |  | $ | 21,447 |  |  | $ | 16,319 |
Other long term assets |  |  | 9,197 |  |  |  | 8,110 |
Other current liabilities |  |  | 12 |  |  |  | 687 |
Deferred income taxes |  |  | 141,020 |  |  |  | 62,046 |
At December 31, 2013 we had state and foreign tax net operating loss (“NOL”) carryforwards of $92.1 million and $32.7 million, respectively. These NOL carryforwards are available to offset future taxable income, if any. The state NOL carryforwards expire between 2014 and 2033; certain foreign NOL carryforwards expire between 2014 and 2033. The state and foreign NOL carryforwards on the income tax returns filed included unrecognized tax benefits taken in prior years. The NOLs for which a deferred tax asset is recognized for financial statement purposes in accordance with ASC 740 are presented net of these unrecognized tax benefits. In addition, we had various state tax credit carryforwards totaling $0.4 million, which expire between 2014 and 2027, and foreign investment tax credits of $3.8 million which expire between 2019 and 2033. As of December 31, 2013 and 2012, we had a valuation allowance of $6.2 million and $30.5 million, respectively, against net deferred tax assets, primarily due to uncertainty regarding the ability to utilize state and foreign tax NOL carryforwards and certain deferred foreign tax credits. The change in the valuation allowance was primarily due to the expiration of fully reserved NOLs. Tax credits and other incentives reduce tax expense in the year the credits are claimed. We recorded tax credits of $3.0 million, $0.4 million and $1.0 million in 2013, 2012 and 2011, respectively, related to research and development credits and the fuels tax credits. At December 31, 2013 and 2012, unremitted earnings of subsidiaries outside the United States deemed to be permanently reinvested totaled $288.8 million and $236.3 million, respectively. Because the unremitted earnings of subsidiaries are deemed to be permanently reinvested as of December 31, 2013 and because we have no need for or plans to repatriate such earnings, no deferred tax liability has been recognized in our consolidated financial statements. It is not practicable to determine the amount of additional taxes that have not been provided. As of December 31, 2013, 2012 and 2011, we had $14.9 million, $30.4 million and $29.7 million of gross unrecognized tax benefits, respectively. As of December 31, 2013, if such benefits were to be recognized, approximately $14.9 million would be recorded as a component of income tax expense, thereby affecting our effective tax rate. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
In millions |  |  | 2013 |  |  |  | 2012 |  |  |  | 2011 |
Balance at January 1 |  | $ | 30.4 |  |  | $ | 29.7 |  |  | $ | 38.7 |
Increases in tax positions for prior years |  |  | 0.2 |  |  |  | 1.4 |  |  |  | 0. 8 |
Decreases in tax positions for prior years |  |  | (4.9 | ) |  |  | (1.0 | ) |  |  | (7.5 | )
Acquisition related: |  |  |  |  |  |  |  |  |  |  |  |
Purchase Accounting(1) |  |  | 1.3 |  |  |  | – |  |  |  | – |
Increases in tax positions for current year |  |  | 1.7 |  |  |  | 1.9 |  |  |  | 1.1 |
Settlements |  |  | – |  |  |  | (0.4 | ) |  |  | (0.1 | )
Lapse in statutes of limitation |  |  | (13.8 | ) |  |  | (1.2 | ) |  |  | (3.3 | )
Balance at December 31 |  | $ | 14.9 |  |  | $ | 30.4 |  |  | $ | 29.7 |
(1) | in connection with acquisition accounting for the Dresden transaction, we recorded a $1.3 million reserve for an uncertain tax position and at the same time recorded a receivable from the seller due to an indemnification agreement.
We, or one of our subsidiaries, file income tax returns with the United States Internal Revenue Service, as well as various state and foreign authorities. The following table summarizes tax years that remain subject to examination by major jurisdiction:
|  | Open Tax Years |
Jurisdiction |  | Examinations not yet initiated |  | Examination in progress |
United States |  |  |  |  |  |
Federal |  | 2010 – 2013 |  |  | N/A |
State |  | 2009 – 2013 |  |  | N/A |
Canada(1) |  | 2010 – 2013 |  |  | 2007, 2009 |
Germany(1) |  | 2012 – 2013 |  |  | 2007 – 2012 |
France |  | 2010, 2013 |  |  | 2011 – 2012 |
United Kingdom |  | 2010 – 2013 |  |  | N/A |
Philippines |  | 2012 – 2013 |  |  | 2010 – 2011 |
(1) | includes provincial or similar local jurisdictions, as applicable.
The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for uncertain tax positions. Based on these reviews and the result of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit, reserves are adjusted as necessary. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are determined or resolved or as such statutes are closed. Due to potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitation, it is reasonably possible our gross unrecognized tax benefits balance may decrease within the next twelve months by a range of zero to $5.4 million. Substantially all of this range relates to tax positions taken in the U.S. and in Germany. We recognize interest and penalties related to uncertain tax positions as income tax expense. The following table summarizes information related to interest and penalties on uncertain tax positions:
|  | As of or for the year ended December 31, |
In millions |  |  | 2013 |  |  |  | 2012 |  |  |  | 2011 |
Accrued interest payable |  | $ | 0.6 |  |  | $ | 1.4 |  |  | $ | 1.7 |
Interest expense (income) |  |  | (0.8 | ) |  |  | (0.3 | ) |  |  | (2.1 | )
Penalties |  |  | – |  |  |  | – |  |  |  | – |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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