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17. Income Taxes
Our anticipated annual effective tax rate of approximately 38.0% has been applied to our consolidated pre-tax income for the nine month period ended December 31, 2011. Our anticipated annual effective tax rate was different than the U.S. federal statutory rate primarily due to state taxes, a difference in rates between the U.S. and foreign jurisdictions, and certain permanent differences, such as nondeductible compensation expenses. For the nine months ended December 31, 2010, the Company’s provision for income taxes reflects an effective benefit rate of approximately 59.6%. The effective tax rate was higher than the U.S. statutory rate due to deferred taxes released when the outstanding Canadian debt facility was retired. For the three month periods ended December 31, 2011 and 2010, the Company recorded tax expense of $4,074 and $1,592 on pre-tax income of $11,007 and $4,601, respectively. In the nine month period ended December 31, 2011 and the eight month period ended December 31, 2010, the Company recorded approximately $3,294 and $927 of income tax expense on pre-tax income (loss) of approximately $9,075 and $(10,033), respectively.
For the period from April 1 through April 30, 2010 of the Predecessor, an income tax benefit of approximately $17,434 was recorded on a pre-tax loss of $17,701. In connection with the CHS Transactions, the Canadian debt facility was repaid releasing a deferred tax liability of $14,945. Without the benefit of the deferred tax reversal related to the Canadian debt facility, the benefit rate amounted to approximately 14.1%. This benefit rate was increased by foreign tax credits and exchange losses associated with repatriated earnings and decreased by the amount of sellers’ expense stemming from the CHS Transactions that is anticipated to be non-deductible.
As of December 31, 2011, we have established a long-term liability for uncertain tax positions in the amount of $1,307 and have recognized no material adjustments to the liability recorded as of March 31, 2011. All of our unrecognized tax benefits at December 31, 2011 would affect our effective income tax rate if recognized, though the Company does not expect to recognize any tax benefits in the next twelve months. The Company recognizes related accrued interest and penalties as income tax expense and has accrued $102 for the nine months ending December 31, 2011, resulting in a cumulative total accrual of $163.
Tax years 2007 through 2010 generally remain open to examination by the major taxing jurisdictions to which we are subject. The Company’s U.S. federal income tax returns are under exam for the Predecessor’s tax years ending April 30, 2010 and March 31, 2010, and as of December 31, 2011 no adjustments have been proposed. The Company’s Canadian federal income tax returns are under exam for the Predecessor’s tax years ending March 31, 2008, 2009 and 2010. See Note 12, “Commitments and Contingencies”.
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