Cleveland-Cliffs Inc. Annual report pursuant to Section 13 and 15(d)

INCOME TAXES (Tables)

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Income from Continuing Operations Before Income Taxes and Equity Income (Loss) from Ventures

Income (Loss) from Continuing Operations Before Income Taxes and Equity Income (Loss) from Ventures includes the following components:



	(In Millions)
	2012			2011		2010
United States	$	838.6		$	1,506.5	$	602.1
Foreign	(1,340.4		)	684.0		664.3
	$	(501.8	)	$	2,190.5	$	1,266.4

Schedule of Components of Provision (Benefit) for Income Taxes on Continuing Operations

The components of the provision (benefit) for income taxes on continuing operations consist of the following:



	(In Millions)
	2012			2011			2010
Current provision (benefit):
United States federal	$	71.1		$	246.8		$	109.6
United States state & local	7.6			2.8			2.6
Foreign	50.2			224.7			155.1
	128.9			474.3			267.3
Deferred provision (benefit):
United States federal	221.2			23.8			61.1
United States state & local	1.4			4.7			5.2
Foreign	(95.6		)	(95.1		)	(51.1		)
	127.0			(66.6		)	15.2
Total provision on income (loss) from continuing operations	$	255.9		$	407.7		$	282.5

Schedule of Effective Income Tax Reconciliation

Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate is as follows:



	(In Millions)
	2012			2011			2010
Tax at U.S. statutory rate of 35 percent	$	(175.6	)	$	766.7		$	443.2
Increase (decrease) due to:
Foreign exchange remeasurement	62.3			(62.6		)	—
Non-taxable loss (income) related to noncontrolling interests	61.0			(63.6		)	—
Impact of tax law change	(357.1		)	—			16.1
Percentage depletion in excess of cost depletion	(109.1		)	(153.4		)	(103.1		)
Impact of foreign operations	65.2			(44.0		)	(89.0		)
Legal entity restructuring	—			—			(87.4		)
Income not subject to tax	(108.0		)	(67.5		)	—
Goodwill impairment	202.2			—			—
Non-taxable hedging income	—			(32.4		)	—
State taxes, net	7.3			7.5			3.1
Manufacturer’s deduction	(4.7		)	(11.9		)	—
Valuation allowance	634.5			49.5			83.3
Tax uncertainties	(14.8		)	17.7			27.7
Other items — net	(7.3		)	1.7			(11.4		)
Income tax expense	$	255.9		$	407.7		$	282.5

Schedule of Income Taxes Other Than Continuing Operations

The components of income taxes for other than continuing operations consisted of the following:



	(In Millions)
	2012			2011			2010
Other comprehensive (income) loss:
Pension/OPEB liability	$	13.8		$	(60.2	)	$	14.0
Mark-to-market adjustments	1.7			(17.7		)	1.7
Other	2.6			—			—
Total	$	18.1		$	(77.9	)	$	15.7

Paid in capital — stock based compensation	$	(12.8	)	$	(4.6	)	$	(4.0	)
Discontinued Operations	$	10.4		$	3.2		$	9.5

Schedule of Significant Components of Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows:



	(In Millions)
	2012			2011
Deferred tax assets:
Pensions	$	161.2		$	154.8
MRRT starting base allowance	357.1			—
Postretirement benefits other than pensions	87.7			109.8
Alternative minimum tax credit carryforwards	274.9			228.5
Capital loss carryforwards	—			3.8
Investment in ventures	14.1			—
Asset retirement obligations	48.2			42.9
Operating loss carryforwards	396.4			260.7
Product inventories	45.4			30.1
Properties	49.2			44.8
Lease liabilities	31.0			38.8
Other liabilities	140.9			149.3
Total deferred tax assets before valuation allowance	1,606.1			1,063.5
Deferred tax asset valuation allowance	858.4			223.9
Net deferred tax assets	747.7			839.6
Deferred tax liabilities:
Properties	1,350.5			1,345.0
Investment in ventures	207.6			155.9
Intangible assets	24.6			13.5
Income tax uncertainties	48.5			56.7
Financial derivatives	1.6			1.3
Product inventories	19.6			—
Other assets	101.9			98.2
Total deferred tax liabilities	1,754.3			1,670.6
Net deferred tax (liabilities) assets	$	(1,006.6	)	$	(831.0	)

Schedule of Classification of Deferred Tax Assets and Liabilities

The deferred tax amounts are classified in the Statements of Consolidated Financial Position as current or long-term consistently with the asset or liability to which they relate. Following is a summary:



	(In Millions)
	2012			2011
Deferred tax assets:
United States
Current	$	5.2		$	17.7
Long-term	—			162.8
Total United States	5.2			180.5
Foreign
Current	3.8			4.2
Long-term	151.5			46.7
Total deferred tax assets	160.5			231.4
Deferred tax liabilities:
United States	58.4			—
Foreign
Long-term	1,108.7			1,062.4
Total deferred tax liabilities	1,167.1			1,062.4
Net deferred tax (liabilities)	$	(1,006.6	)	$	(831.0	)

Schedule of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	(In Millions)
	2012			2011			2010
Unrecognized tax benefits balance as of January 1	$	102.1		$	79.8		$	75.2
Increases for tax positions in prior years	2.7			42.1			1.9
Increases for tax positions in current year	11.1			29.5			—
Increase due to foreign exchange	—			—			0.7
Settlements	(60.4		)	(3.5		)	—
Lapses in statutes of limitations	—			(45.8		)	—
Other	—			—			2.0
Unrecognized tax benefits balance as of December 31	$	55.5		$	102.1		$	79.8