CHS 2011 Annual Report Download - page 45

44 2011 CHS
NOTE 8
Income Taxes, continued
Deferred tax assets and liabilities as of August 31, 2011
and 2010 are as follows:
(DOLLARS IN THOUSANDS) 2011 2010
Deferred tax assets:
Accrued expenses $ 88,028 $ 88,246
Postretirement health care and deferred
compensation 100,256 111,437
Tax credit carryforwards 93,609 57,449
Loss carryforwards 71,471 50,171
Other 43,653 35,060
Total deferred tax assets 397,017 342,363
Deferred tax liabilities:
Pension 56,702 36,341
Investments 76,959 56,744
Major maintenance 4,591 6,017
Property, plant and equipment 439,639 337,654
Other 4,796 6,647
Total deferred tax liabilities 582,687 443,403
Deferred tax assets valuation reserve (47,599) (36,935)
Net deferred tax liabilities $233,269 $137,975
During the year ended August 31, 2011, the valuation
allowance for the Company’s deferred tax asset related
to certain foreign subsidiary losses increased by
$5.5 million. Valuation allowances associated with cer-
tain capital loss carryforwards were reduced by
$24.6 million during fiscal 2011, due to the existence
of offsetting capital gains generated as a result of the
sale of the Company’s interest in Multigrain. During the
year ended August 31, 2011, the valuation allowance for
NCRA increased by $29.8 million due to a change in the
amount of 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.
The Company’s foreign tax credit of $7.0 million will
expire on August 31, 2019. The Company’s general
business credit carryforward of $51.5 million will begin
to expire on August 31, 2027.
As of August 31, 2011, net deferred taxes of $59.9 million
and $293.1 million are included in current assets and other
liabilities, respectively ($45.5 million and $183.5 million in
current assets and other liabilities, respectively, as of
August 31, 2010).
The reconciliation of the statutory federal income tax
rates to the effective tax rates for the years ended
August 31, 2011, 2010 and 2009 is as follows:
2011 2010 2009
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of federal
income tax benefit 1.3 0.8 0.0
Patronage earnings (20.5) (23.8) (25.5)
Domestic production activities deduction (3.2) (1.5) 1.4
Export activities at rates other than the U.S.
statutory rate 0.0 1.0 0.3
Valuation allowance 0.9 0.8 2.4
Tax credits (3.1) (0.2) (0.7)
Other (2.8) (3.8) (0.3)
Effective tax rate 7.6% 8.3% 12.6%
The Company files income tax returns in the U.S. federal
jurisdiction, and various state and foreign jurisdictions.
With few exceptions, the Company is no longer subject to
U.S. federal, state and local examinations by tax author-
ities for years ending on or before August 31, 2006.
The Company accounts for its income tax provisions of
ASC Topic 740, Income Taxes, which prescribes a min-
imum threshold that a tax provision is required to meet
before being recognized in the consolidated financial
statements. This interpretation requires the Company
to recognize in the consolidated financial statements tax
positions determined more likely than not to be sus-
tained upon examination, based on the technical merits
of the position. A reconciliation of the gross beginning
and ending amounts of unrecognized tax benefits for the
periods presented is as follows:
(DOLLARS IN THOUSANDS) 2011 2010 2009
Beginning balances $69,357 $72,519 $ 5,840
Increases for current year tax
positions 1,381
Increases for tax positions
of prior years 65,697
Reductions attributable
to statute expiration (2,086) (3,162) (399)
Balances at August 31 $67,271 $69,357 $72,519
The increase in the unrecognized tax benefit of $65.7 mil-
lion during fiscal 2009 relates to clarifications received
from the Internal Revenue Service on the method used for
calculating the Company’s production tax credits under
Section 199 for which the ultimate deductibility is highly
certain but for which there is uncertainty about the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS