|12 Months Ended|
Dec. 31, 2012
|Income Tax Disclosure [Abstract]|
Income tax provision included in our reported net loss consisted of the following (in thousands):
The reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows:
Significant components of our deferred tax assets and liabilities at December 31, 2012 and 2011 are as follows (in thousands):
(2) A valuation allowance equal to our U.S. and state net deferred tax asset balance has been established due to the uncertainty of realizing the tax benefits related to our U.S. and state net deferred tax assets. The change in the U.S. and state deferred tax asset valuation allowance was $132.7 million for the year ended December 31, 2012, of which $114.5 million relates to continuing operations and $9.2 million relates to other comprehensive income. Additionally, $9 million relates to an additional deferred tax asset and related valuation reserve due to previously unrecorded net deferred federal and state tax assets. The change in the U.S. and state deferred tax asset valuation was $83.5 million for the year ended December 31, 2011.
Changes in the balance of unrecognized tax benefits are as follows (in thousands):
Our effective tax rate will not be affected if the unrecognized federal income tax benefits provided above were recognized. Currently, we do not recognize any accrued liabilities, interest and penalties associated with the unrecognized tax benefits provided above in the Consolidated Statements of Operations or the Consolidated Balance Sheets. We record interest and penalties related to unrecognized tax benefits to our income tax provision.
During the third quarter of 2012, largely due to the increased level of trading activity in our shares, we experienced an ownership change within the provisions of Internal Revenue Code Section 382 ("Section 382") that will subject approximately $1.5 billion of our existing federal NOL carryforwards to an annual NOL utilization limitation. The applicable Section 382 limitation may affect our ability to fully utilize approximately $1.5 billion of our existing federal NOL carryforward. Our ability to fully utilize our existing federal NOL carryforward is dependent on increasing the recognition of built-in gains in the five-year period following the above-referenced ownership change. We will continue to monitor trading activity in our shares which may cause an additional ownership change which may ultimately affect our ability to fully utilize our existing federal NOL carryforwards.
We currently file tax returns in the U.S. federal jurisdiction, the United Kingdom and various state and local jurisdictions. We are no longer subject to U.S. federal, state or local income tax examinations by tax authorities for tax years prior to 2008. The Internal Revenue Service is currently examining Cheniere Marketing's 2009 and 2010 income tax returns. The Louisiana Department of Revenue is currently examining Cheniere LNG Terminals, Inc.'s 2008 - 2010 income tax returns.
Accounting for share-based compensation provides that when settlement of a share based award contributes to an NOL carryforward, neither the associated excess tax benefit nor the credit to additional paid-in capital ("APIC") should be recorded until the share-based award deduction reduces income tax payable. Upon utilization of the loss in future periods, a benefit of $22.5 million will be reflected in APIC.
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef