Income Taxes
The provision for income taxes for the years ended August 31, 2013, 2012 and 2011 is as follows:
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
| (Dollars in thousands) |
Current | | | | | |
Federal | $ | (18,018 | ) | | $ | 9,565 |
| | $ | 10,564 |
|
State | 11,805 |
| | 7,851 |
| | 8,922 |
|
Foreign | 3,162 |
| | 4,812 |
| | 53 |
|
| (3,051 | ) | | 22,228 |
| | 19,539 |
|
Deferred | | | | | |
Federal | 92,102 |
| | 66,707 |
| | 54,435 |
|
State | 1,685 |
| | 1,617 |
| | 9,454 |
|
Foreign | (1,070 | ) | | (9,700 | ) | | 3,200 |
|
| 92,717 |
| | 58,624 |
| | 67,089 |
|
Total | $ | 89,666 |
| | $ | 80,852 |
| | $ | 86,628 |
|
Deferred taxes are comprised of basis differences related to investments, accrued liabilities and certain federal and state tax credits. NCRA files separate tax returns and, as such, these items must be assessed independent of our deferred tax assets when determining recoverability.
Deferred tax assets and liabilities as of August 31, 2013 and 2012 were as follows:
|
| | | | | | | |
| 2013 | | 2012 |
| (Dollars in thousands) |
Deferred tax assets: | |
| | |
|
Accrued expenses | $ | 66,973 |
| | $ | 89,844 |
|
Postretirement health care and deferred compensation | 57,130 |
| | 107,817 |
|
Tax credit carryforwards | 97,242 |
| | 118,752 |
|
Loss carryforwards | 57,174 |
| | 30,272 |
|
Other | 40,868 |
| | 57,429 |
|
Deferred tax assets valuation | (79,623 | ) | | (56,659 | ) |
Total deferred tax assets | 239,764 |
| | 347,455 |
|
Deferred tax liabilities: | |
| | |
|
Pension | 6,752 |
| | 35,516 |
|
Investments | 91,453 |
| | 120,879 |
|
Major maintenance | 31,960 |
| | 9,141 |
|
Property, plant and equipment | 529,101 |
| | 453,863 |
|
Other | — |
| | 175 |
|
Total deferred tax liabilities | 659,266 |
| | 619,574 |
|
Net deferred tax liabilities | $ | 419,502 |
| | $ | 272,119 |
|
We have total loss carry forwards of $146.8 million, of which $81.4 million will expire over periods ranging from fiscal 2014 to fiscal 2024. NCRA’s gross state tax credit carry forwards for income tax are approximately $88.1 million and $99.5 million as of August 31, 2013, and 2012, respectively. During the year ended August 31, 2013, the valuation allowance for NCRA decreased by $4.0 million due to a change in the amount of state tax credits that are estimated to be utilized. NCRA’s valuation allowance is necessary due to the limited amount of taxable income it generates on an annual basis. Based on estimates of future taxable profits and losses in certain foreign tax jurisdictions, we determined that a valuation allowance was required for specific foreign loss carry forwards as of August 31, 2013. If these estimates prove inaccurate, a change in the valuation allowance, up or down, could be required in the future. During 2013, foreign loss tax valuation allowances increased by $26.1 million.
Our foreign tax credit of $7.0 million will expire on August 31, 2019. Our general business credits of $39.0 million , comprised primarily of low sulfur diesel credits, will begin to expire on August 31, 2027.
As of August 31, 2013, net deferred taxes of $39.3 million and $458.8 million were included in other current assets and other liabilities, respectively. As of August 31, 2012, net deferred taxes of $37.6 million and $309.7 million were included in other current assets and other liabilities, respectively.
The reconciliation of the statutory federal income tax rates to the effective tax rates for the years ended August 31, 2013, 2012 and 2011 is as follows:
|
| | | | | | | | |
| 2013 | | 2012 | | 2011 |
Statutory federal income tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % |
State and local income taxes, net of federal income tax benefit | 0.9 |
| | 0.5 |
| | 1.3 |
|
Patronage earnings | (22.9 | ) | | (24.2 | ) | | (20.5 | ) |
Domestic production activities deduction | (8.5 | ) | | (3.5 | ) | | (3.2 | ) |
Export activities at rates other than the U.S. statutory rate | 0.6 |
| | 0.4 |
| | 0.5 |
|
Valuation allowance | 2.3 |
| | 0.6 |
| | 0.9 |
|
Tax credits | (0.5 | ) | | (1.3 | ) | | (3.1 | ) |
Non-controlling interests | (0.1 | ) | | (1.9 | ) | | (3.0 | ) |
Other | 1.5 |
| | 0.1 |
| | (0.4 | ) |
Effective tax rate | 8.3 | % | | 5.7 | % | | 7.5 | % |
We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. In addition to the current year, fiscal 2006 through 2012 remain subject to examination, at least for certain issues.
We account for our income tax provisions in accordance with ASC 740, Income Taxes, which prescribes a minimum threshold that a tax provision is required to meet before being recognized in our consolidated financial statements. This interpretation requires us to recognize in our consolidated financial statements tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the position. Reconciliation of the gross beginning and ending amounts of unrecognized tax benefits for the periods presented follows:
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
| (Dollars in thousands) |
Balance at beginning of period | $ | 67,271 |
| | $ | 67,271 |
| | $ | 69,357 |
|
Reductions attributable to statute expiration |
|
| |
|
| | (2,086 | ) |
Balance at end of period | $ | 67,271 |
| | $ | 67,271 |
| | $ | 67,271 |
|
If we were to prevail on all tax positions taken relating to uncertain tax positions, substantially all of the unrecognized tax benefits would benefit the effective tax rate. We do not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease during the next 12 months.
We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. For the years ended August 31, 2013, 2012 and 2011, we recognized in our Consolidated Statements of Operations $0.2 million, $0.2 million and $0.1 million, respectively, for interest related to unrecognized tax benefits. We recorded interest payable related to unrecognized tax benefits on our Consolidated Balance Sheets of $0.6 million and $0.4 million, as of August 31, 2013 and 2012, respectively.
