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18. INCOME TAXES

ÌýÌýÌýÌýÌýÌýÌýÌýThe following is a summary of U.S. and non-U.S. provisions for current and deferred income taxes (dollars in millions):

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

ÌýÌýÌýÌýÌýÌýÌýÌýThe following schedule reconciles the differences between the U.S. federal income taxes at the U.S. statutory rate to our provision (benefit) for income taxes (dollars in millions):

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

ÌýÌýÌýÌýÌýÌýÌýÌýOn SeptemberÌý8, 2009, we announced the closure of our Australia Styrenics operations. U.S. tax law, under our relevant facts, provides for a deduction on investments that are "worthless" for U.S. tax purposes. Therefore, during 2011, 2010, and 2009, we recorded tax benefits of $2Ìýmillion, $28Ìýmillion and $74Ìýmillion, respectively, in discontinued operations related to the closure of and the cumulative U.S. investments in our Australia Styrenics business.

ÌýÌýÌýÌýÌýÌýÌýÌýIncluded in the 2011, 2010 and 2009 non-U.S. deferred tax expense is $1Ìýmillion, $4Ìýmillion and $38Ìýmillion, respectively, of income tax benefit for losses from continuing operations for certain jurisdictions with valuation allowances to the extent income was recorded in other comprehensive income. An offsetting income tax expense was recognized in accumulated other comprehensive income.

ÌýÌýÌýÌýÌýÌýÌýÌýThe components of income (loss) from continuing operations before income taxes were as follows (dollars in millions):

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

ÌýÌýÌýÌýÌýÌýÌýÌýComponents of deferred income tax assets and liabilities were as follows (dollars in millions):

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

ÌýÌýÌýÌýÌýÌýÌýÌýWe have net operating loss carryforwards ("NOLs") of $2,743Ìýmillion in various non-U.S. jurisdictions. While the majority of the non-U.S. NOLs have no expiration date, $1,172Ìýmillion have a limited life (of which $1,064Ìýmillion are subject to a valuation allowance) and none are scheduled to expire in 2012. We had $68Ìýmillion of NOLs expire unused in 2011, substantially all of which were in Switzerland and had been subject to a full valuation allowance.

ÌýÌýÌýÌýÌýÌýÌýÌýIncluded in the $2,743Ìýmillion of non-U.S. NOLs is $977Ìýmillion attributable to our Luxembourg entities. As of DecemberÌý31, 2011, there is a valuation allowance of $268Ìýmillion against these net tax-effected NOLs of $281Ìýmillion. Due to the uncertainty surrounding the realization of the benefits of these losses, we have reduced substantially all of the related deferred tax asset with a valuation allowance.

ÌýÌýÌýÌýÌýÌýÌýÌýValuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of businesses and cumulative income or losses during the applicable period. Cumulative losses incurred over the period limits our ability to consider other subjective evidence such as our projections for the future.

ÌýÌýÌýÌýÌýÌýÌýÌýDuring 2011, we released valuation allowances of $27Ìýmillion on a portion of our net deferred tax assets in France, Spain, Singapore, Australia and Luxembourg, and we established valuation allowances of $5Ìýmillion on certain net deferred tax assets in China and Thailand.

ÌýÌýÌýÌýÌýÌýÌýÌýRecent profitability in our Pigments business has led to sufficient positive evidence to release a portion of the valuation allowances in France and Spain, in amounts of $10Ìýmillion and $2Ìýmillion, respectively. Continued and sustained profitability in the Pigments business could result in additional valuation allowances being released in the future. The valuation allowance in Singapore of $2Ìýmillion was released primarily as a result of a cumulative history of operating profits. Additional partial valuation allowance releases were recognized in Australia of $5Ìýmillion and Luxembourg of $8Ìýmillion, and these will continue to be periodically adjusted with any significant changes in estimated future taxable income, all within the current plans for the future tax structure of these jurisdictions.

ÌýÌýÌýÌýÌýÌýÌýÌýCumulative losses and the restructuring of our Textile Effects business resulted in the determination that it is more likely than not that the deferred tax assets of the Textile Effects businesses in China of $4Ìýmillion and Thailand of $1Ìýmillion would not be realized. Continued sustained losses in the Textile Effects business could result in the future establishment of additional valuation allowances in other jurisdictions.

ÌýÌýÌýÌýÌýÌýÌýÌýDuring 2010, we released valuation allowances of $20Ìýmillion on certain net deferred tax assets, principally in Australia (as a result of discontinuing the unprofitable portion of the business operations in that country) and Luxembourg (as a result of restructuring our internal treasury activities such that a portion of the deferred tax assets is more likely than not to be realized). During 2009, we established valuation allowances of $149Ìýmillion on certain net deferred tax assets, principally in the U.K., primarily as a result of a cumulative history of operating losses.

ÌýÌýÌýÌýÌýÌýÌýÌýUncertainties regarding expected future income in certain jurisdictions could affect the realization of deferred tax assets in those jurisdictions and result in additional valuation allowances in future periods.

ÌýÌýÌýÌýÌýÌýÌýÌýThe following is a summary of changes in the valuation allowance (dollars in millions):

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

ÌýÌýÌýÌýÌýÌýÌýÌýThe following is a reconciliation of our unrecognized tax benefits (dollars in millions):

ÌýÌýÌýÌýÌýÌýÌýÌýAs of DecemberÌý31, 2011 and 2010, the amount of unrecognized tax benefits which, if recognized, would affect the effective tax rate is $31Ìýmillion and $32Ìýmillion, respectively.

ÌýÌýÌýÌýÌýÌýÌýÌýIn accordance with our accounting policy, we continue to recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense.

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ÌýÌýÌýÌýÌýÌýÌýÌýWe conduct business globally and, as a result, we file income tax returns in the U.S. federal, various U.S. state and various non-U.S. jurisdictions. The following table summarizes the tax years that remain subject to examination by major tax jurisdictions:

ÌýÌýÌýÌýÌýÌýÌýÌýCertain of our U.S. and non-U.S. income tax returns are currently under various stages of audit by applicable tax authorities and the amounts ultimately agreed upon in resolution of the issues raised may differ materially from the amounts accrued.

ÌýÌýÌýÌýÌýÌýÌýÌýWe estimate that it is reasonably possible that certain of our unrecognized tax benefits, which are individually insignificant, (both U.S. and non-U.S.) could change within 12Ìýmonths of the reporting date with a resulting decrease in the unrecognized tax benefits within a reasonably possible range of $2Ìýmillion to $19Ìýmillion. For the 12-month period from the reporting date, we would expect that a substantial portion of the decrease in our unrecognized tax benefits would result in a corresponding benefit to our income tax expense.

ÌýÌýÌýÌýÌýÌýÌýÌýDuring 2011, we concluded and effectively settled tax examinations in the U.S. (both Federal and various states) and various non-U.S. jurisdictions including, but not limited to, Australia, China, France and Germany. During 2010, we concluded and settled tax examinations in the U.S. (both Federal and various states) and various non-U.S. jurisdictions including, but not limited to, Belgium, Spain, Indonesia, Thailand and the U.K. During 2009, we concluded and settled tax examinations in the U.S. (both Federal and various states) and various non-U.S. jurisdictions including, but not limited to, Belgium and Italy.

ÌýÌýÌýÌýÌýÌýÌýÌýFor non-U.S. entities that were not treated as branches for U.S. tax purposes, the Company does not provide for income taxes on the undistributed earnings of these subsidiaries as earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely. The undistributed earnings of foreign subsidiaries that are deemed to be permanently invested were approximately $226Ìýmillion at DecemberÌý31, 2011. It is not practicable to determine the unrecognized deferred tax liability on those earnings. We have material inter-company debt obligations owed by our non-U.S. subsidiaries to the U.S. The Company does not intend to repatriate earnings to the U.S. via dividend based on estimates of future domestic cash generation and our ability to return cash to the U.S. through payments of inter-company debt owned by our non-U.S. subsidiaries to the U.S. To the extent that cash is required in the U.S., rather than repatriate earnings to the U.S. via dividend we will utilize our inter-company debt. If any earnings were repatriated via dividend, the Company would need to accrue and pay taxes on the distributions.