Income Taxes

3 Months Ended

Mar. 31, 2012

Note 7. Income Taxes

The U.S. Federal tax statutory rate reconciles to the effective tax rate as follows:


	Three Months Ended March 31,
	2012			2011
U.S. Federal income tax rate		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		1.8			0.9
Costs/(Benefits) and taxes related to foreign operations		6.9			(43.8	)
Foreign tax rate differential		(13.1	)		(24.7	)
Foreign exchange differential on tax benefits		(0.8	)		1.8
Change in valuation allowance		2.1			15.8
Change in accrual for tax uncertainties		0.4			14.4
Other		0.3			(1.1	)

Effective income tax rate		32.6	%		(1.7	)%

Income tax expense was $12.1 million for the three months ended March 31, 2012, resulting in an effective tax rate of 32.6%, primarily as a result of the current mix of income from multiple tax jurisdictions and the impact of share-based compensation expense not deductible for tax purposes. See Note 11 to our unaudited condensed consolidated financial statements. We had income tax expense of $0.1 million for the three months ended March 31, 2011, resulting in an effective tax rate of (1.7%), primarily as a result of the exclusion of the tax benefit of foreign ordinary losses not expected to be realized, the current mix of income from multiple tax jurisdictions and the resolution of state tax audits.

We had $22.0 million of unrecognized tax benefits at March 31, 2012 and $21.6 million at December 31, 2011, which if recognized, would affect the effective income tax rate.

In the next twelve months, it is reasonably possible that the total amounts of our unrecognized tax benefits will not significantly increase or decrease.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. The total amount of accrued interest and penalties at March 31, 2012 was $3.4 million and at December 31, 2011 was $3.2 million. Potential interest and penalties associated with uncertain tax positions recognized during the three months ended March 31, 2012 and 2011 were not significant. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

We file income tax returns, including returns for our subsidiaries, with federal, state, local and foreign jurisdictions. Generally, we are subject to routine examination by taxing authorities in these jurisdictions, including significant international tax jurisdictions, such as the United Kingdom, Germany, Spain, Switzerland, Singapore and Mexico. We do not expect any of these foreign jurisdictions to be individually material. We also have various state and foreign income tax returns in the process of examination. From time to time, these audits result in proposed assessments where the ultimate resolution may result in us owing additional taxes. We believe that our tax positions comply with applicable tax law and that we have adequately provided for these matters.

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 43, 44, 45, 46, 47, 48, 49

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

-Article 4

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 9

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 15

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(h))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

+ Details

Burger King Holdings Inc 10-Q