Corporate tax rate overhaul may be part of a 'fiscal cliff' deal

WASHINGTON — Amid the wrangling over the so-called fiscal cliff, President Obama and congressional Republicans can agree on something: They want to lower the corporate tax rate.

The U.S. has the highest overall rate of any of the world's developed economies. It took the top spot in March after Japan reduced its rate, mimicking other countries that have lowered taxes to lure new businesses and keep existing companies from leaving.

Negotiations to avert automatic income tax increases and federal spending cuts scheduled to kick in Jan. 1 could provide the impetus for U.S. policymakers to tackle an overhaul of the corporate tax code next year.

The White House wants to put a corporate tax overhaul, along with changes to the individual income tax system, on a fast track as part of any deal to avoid the "fiscal cliff."

The centerpiece of an overhaul would be slashing the 35% corporate tax rate, a goal long sought by corporate executives and lobbyists.

Quiz: How much do you know about the 'fiscal cliff'?

"In the name of global competitiveness, I think that has largely been agreed to," Jim McNerney, chief executive of Boeing Co., said about how both parties view the need for major corporate tax changes.

In February, Obama proposed lowering the federal rate to 25% for manufacturing companies and to 28% for other firms. Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, has been pushing a plan to lower the rate to 25% for all corporations.

In both cases, the rate cuts would be accompanied by the elimination of some of the numerous tax breaks that allow many companies to pay a much lower effective tax rate — and sometimes to avoid paying any corporate taxes at all.

"The administration's position on this is very much in sync with what Republicans say they want, which is a lower rate and a broader base," said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and the former chief economist for Vice President Joe Biden.

But there still are some obstacles to a deal.

Some Democrats want to use an overhaul to increase the amount of tax revenue coming from corporations, while Republicans want to keep the amount the same. The White House and congressional Republicans also differ on how the U.S. should treat money earned abroad.

And the business community itself is divided. Many small companies file taxes as individuals. They're opposed to any "fiscal cliff" deal that would raise their rates while giving corporations a rate reduction.

Analysts said the obstacles could be overcome because there is consensus around the broader point that the U.S. needs to bring its corporate tax rate in line with other developed nations.

"Regardless of your political persuasion, it is unquestionably the case that the nominal U.S. corporate tax rate is much higher than that of peer countries," said Edward Kleinbard, a USC law professor and former chief of staff of Congress' Joint Committee on Taxation.

The case for corporate tax reform got a boost when the overall U.S. rate of 39.1%, which includes federal, state and local corporate taxes, became the highest this year among the 34 nations in the Organization for Economic Cooperation and Development. Two decades ago, the U.S. was 13th.

"At one time in the '80s, we had a competitive corporate tax rate," said Dorothy Coleman, vice president of tax and domestic economic policy for the National Assn. of Manufacturers. "We've fallen behind by standing still."

Quiz: The year in business

But the rate in the tax code isn't what many companies pay because of a host of deductions and tax credits. In 2011, the effective corporate tax rate in the U.S. was 29.2%, roughly in line with the 31.9% average of the six other largest developed economies, the Obama administration said.

The White House said that parity does not mean the statutory rate shouldn't be reduced. It simply means that many tax breaks should be eliminated, allowing the rate to be lowered without adding to the deficit.

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Lake-effect snow brings white Christmas to some

Brandon Diaz rides on a plastic sled as his dog Domino frolics about in the snow at Cricket Hill near Montrose Harbor in Chicago. (John J. Kim, Chicago Tribune / December 25, 2012)

By Heywood Hoffman




Tribune reporter

2:41 p.m. CST, December 25, 2012

Lake-effect snow late this morning brought a heavy coating of snow to much of the North Side, providing a white Christmas to some.

As of about 11 a.m., 1 to 2 inches of snow coated the ground, mostly north of Belmont Avenue reaching from the lakefront to past Western Avenue.

Roadways were slick and some cars were seen spinning out, including on Lake Shore Drive, although south of Belmont the roads were mostly just wet.

The lake-effect snow showers could last throughout the day and into tomorrow, although they will be spotty and large amounts of accumulation are not expected.

Temperatures were expected to reach the low 30s on Christmas and only 31 on Wednesday, with overnight temps into the low 20s.

For the latest radar, conditions and forecasts, go to chicagoweathercenter.com.

chicagobreaking@tribune.com
Twitter: @ChicagoBreaking

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China may require real name registration for internet access

BEIJING (Reuters) - China may require internet users to register with their real names when signing up to network providers, state media said on Tuesday, extending a policy already in force with microblogs in a bid to curb what officials call rumors and vulgarity.

A law being discussed this week would mean people would have to present their government-issued identity cards when signing contracts for fixed line and mobile internet access, state-run newspapers said.

"The law should escort the development of the internet to protect people's interest," Communist Party mouthpiece the People's Daily said in a front page commentary, echoing similar calls carried in state media over the past week.

"Only that way can our internet be healthier, more cultured and safer."

Many users say the restrictions are clearly aimed at further muzzling the often scathing, raucous - and perhaps most significantly, anonymous - online chatter in a country where the Internet offers a rare opportunity for open debate.

It could also prevent people from exposing corruption online if they fear retribution from officials, said some users.

It was unclear how the rules would be different from existing regulations as state media has provided only vague details and in practice customers have long had to present identity papers when signing contracts with internet providers.

Earlier this year, the government began forcing users of Sina Corp's wildly successful Weibo microblogging platform to register their real names.

The government says such a system is needed to prevent people making malicious and anonymous accusations online and that many other countries already have such rules.

"It would also be the biggest step backwards since 1989," wrote one indignant Weibo user, in apparent reference to the 1989 pro-democracy protests bloodily suppressed by the army.

Chinese internet users have long had to cope with extensive censorship, especially over politically sensitive topics like human rights, and popular foreign sites Facebook, Twitter and Google-owned YouTube are blocked.

Despite periodic calls for political reform, the ruling Communist Party has shown no sign of loosening its grip on power and brooks no dissent to its authority.

(Reporting by Ben Blanchard and Huang Yan; Editing by Michael Perry)

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Rondo leads Celtics past Nets 93-76

NEW YORK (AP) — Rajon Rondo lost his cool, and any chance at history, in the second quarter when Boston last met Brooklyn.

This time, the second period featured some of the best basketball the Celtics have played this season.

Rondo scored 19 points in his first full game against the Nets this season, and the Celtics won 93-76 on Tuesday in another game with some heated moments between the division rivals.

Rondo, sidelined in the first meeting and thrown out of the second after shoving Nets forward Kris Humphries into the courtside seats, outplayed counterpart Deron Williams and helped the Celtics take control early.

"We moved the ball; we rebounded the ball," Rondo said. "They beat us pretty bad on the glass, so tonight we did an exceptional job on the glass, taking care of the defensive rebounds, and we got stops."

A month after the teams scuffled in Boston, there was another skirmish in the fourth quarter that resulted in four technical fouls. But that was the most fight the Nets put up in a disappointing performance on the national stage of the Christmas opener. They were never in the game after the first 20 minutes, and their fans headed to the exits with under 2 minutes left as a "Let's go Celtics!" chant broke out.

"It was a big game for us. It was a division rival. We were ready for a big game. It just didn't happen," Williams said.

Rookie Jared Sullinger tied a career high with 16 points and Jeff Green had 15 for the Celtics (14-13), who avoided falling under .500 with just their second victory in six games.

The Celtics took control with a 23-5 run in the second quarter of the opener of their four-game road trip. They had 11 assists on 13 baskets and outscored the Nets 34-18 in the period after dropping the previous two meetings.

"It was good to get off to this start. It was good to finally play from start to finish, especially with the way we've been playing against Brooklyn," said Paul Pierce, who had just eight points on 3-of-10 shooting. "So it was a well-balanced game, but I'm happy with the start of the trip."

Gerald Wallace and Brook Lopez each scored 15 for the Nets, who have lost four of five. Struggling to find anything that worked, they played Lopez and fellow center Andray Blatche together with three guards at one point, but Brooklyn shot just 41 percent and committed 20 turnovers that led to 25 points.

Williams had only 10 points on 3-of-7 shooting and Joe Johnson, his partner in a high-priced backcourt, shot 4 of 14 for his 12 points.

"This one hurts. We didn't play our game. They beat us from the opening tip," Wallace said. "We didn't make shots. We turned the ball over too easy. Our defense just wasn't there tonight. We were not ourselves tonight."

Boston's Kevin Garnett had eight points and 10 rebounds on the day he tied Charles Oakley for 15th place on the NBA's career list with his 1,282nd game. He was also front and center when things got testy.

Wallace was fouled with 9:31 remaining and appeared to hold onto Garnett's uniform to balance himself and not fall. Garnett was fine with that but then objected to how long Wallace hung on to his shorts, and they said something to each other as they tried to push themselves free. That led to technical fouls on the two, along with Blatche and Courtney Lee.

Garnett said he asked Wallace what he was doing but got no response.

"I don't know where in America you can (yank) somebody's pants off, or shorts off. I don't know what the hell was going on," Garnett said.

Sullinger delivered a flagrant foul on Wallace a few minutes later, but there was nothing further.

In the Nets' Nov. 28 victory in Boston, Rondo, Humphries and Wallace were ejected.

It was the second quarter of that game where things got away from the Celtics, and Rondo's frustrations soon followed when he shoved Humphries after the Nets forward fouled Garnett. That ruined the point guard's chance to extend what was then a 37-game streak with double-digit assists, tied for second-longest ever, by finishing with three. He had five assists and six rebounds Tuesday.

This time, the second period belonged to the guys in green.

With the Celtics down three, Green had six points in a 10-0 run that made it 36-29. After Johnson's basket, Boston answered with a 13-3 spurt. Jason Terry made a 3-pointer before Rondo converted a three-point play to push the Celtics' lead to 49-34 with 3:56 to go.

The Celtics opened a 21-point lead early in the third quarter and cruised from there. Terry finished with 11 points.

Notes: As with everyone playing on Christmas, players, coaches and referees wore green ribbons in tribute to the families of Sandy Hook Elementary School. ... Humphries was out with an abdominal strain and will be re-evaluated after the Nets return from Milwaukee. He had mostly been a starter but then didn't play at all Sunday against Philadelphia. ... Feeling Avery Bradley isn't ready yet, Celtics coach Doc Rivers decided not to bring the guard on the road trip so he can continue working his way back from shoulder surgery in Boston. Rivers said the shoulder is strong but that Bradley has had only 2½ practices.

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Predicting who's at risk for violence isn't easy

CHICAGO (AP) — It happened after Columbine, Virginia Tech, Aurora, Colo., and now Sandy Hook: People figure there surely were signs of impending violence. But experts say predicting who will be the next mass shooter is virtually impossible — partly because as commonplace as these calamities seem, they are relatively rare crimes.

Still, a combination of risk factors in troubled kids or adults including drug use and easy access to guns can increase the likelihood of violence, experts say.

But warning signs "only become crystal clear in the aftermath, said James Alan Fox, a Northeastern University criminology professor who has studied and written about mass killings.

"They're yellow flags. They only become red flags once the blood is spilled," he said.

Whether 20-year-old Adam Lanza, who used his mother's guns to kill her and then 20 children and six adults at their Connecticut school, made any hints about his plans isn't publicly known.

Fox said that sometimes, in the days, weeks or months preceding their crimes, mass murderers voice threats, or hints, either verbally or in writing, things like "'don't come to school tomorrow,'" or "'they're going to be sorry for mistreating me.'" Some prepare by target practicing, and plan their clothing "as well as their arsenal." (Police said Lanza went to shooting ranges with his mother in the past but not in the last six months.)

Although words might indicate a grudge, they don't necessarily mean violence will follow. And, of course, most who threaten never act, Fox said.

Even so, experts say threats of violence from troubled teens and young adults should be taken seriously and parents should attempt to get them a mental health evaluation and treatment if needed.

"In general, the police are unlikely to be able to do anything unless and until a crime has been committed," said Dr. Paul Appelbaum, a Columbia University professor of psychiatry, medicine and law. "Calling the police to confront a troubled teen has often led to tragedy."

The American Academy of Child & Adolescent Psychiatry says violent behavior should not be dismissed as "just a phase they're going through."

In a guidelines for families, the academy lists several risk factors for violence, including:

—Previous violent or aggressive behavior

—Being a victim of physical or sexual abuse

—Guns in the home

—Use of drugs or alcohol

—Brain damage from a head injury

Those with several of these risk factors should be evaluated by a mental health expert if they also show certain behaviors, including intense anger, frequent temper outbursts, extreme irritability or impulsiveness, the academy says. They may be more likely than others to become violent, although that doesn't mean they're at risk for the kind of violence that happened in Newtown, Conn.

Lanza, the Connecticut shooter, was socially withdrawn and awkward, and has been said to have had Asperger's disorder, a mild form of autism that has no clear connection with violence.

Autism experts and advocacy groups have complained that Asperger's is being unfairly blamed for the shootings, and say people with the disorder are much more likely to be victims of bullying and violence by others.

According to a research review published this year in Annals of General Psychiatry, most people with Asperger's who commit violent crimes have serious, often undiagnosed mental problems. That includes bipolar disorder, depression and personality disorders. It's not publicly known if Lanza had any of these, which in severe cases can include delusions and other psychotic symptoms.

Young adulthood is when psychotic illnesses typically emerge, and Appelbaum said there are several signs that a troubled teen or young adult might be heading in that direction: isolating themselves from friends and peers, spending long periods alone in their rooms, plummeting grades if they're still in school and expressing disturbing thoughts or fears that others are trying to hurt them.

Appelbaum said the most agonizing calls he gets are from parents whose children are descending into severe mental illness but who deny they are sick and refuse to go for treatment.

And in the case of adults, forcing them into treatment is difficult and dependent on laws that vary by state.

All states have laws that allow some form of court-ordered treatment, typically in a hospital for people considered a danger to themselves or others. Connecticut is among a handful with no option for court-ordered treatment in a less restrictive community setting, said Kristina Ragosta, an attorney with the Treatment Advocacy Center, a national group that advocates better access to mental health treatment.

Lanza's medical records haven't been publicly disclosed and authorities haven't said if it is known what type of treatment his family may have sought for him. Lanza killed himself at the school.

Jennifer Hoff of Mission Viejo, Calif. has a 19-year-old bipolar son who has had hallucinations, delusions and violent behavior for years. When he was younger and threatened to harm himself, she'd call 911 and leave the door unlocked for paramedics, who'd take him to a hospital for inpatient mental care.

Now that he's an adult, she said he has refused medication, left home, and authorities have indicated he can't be forced into treatment unless he harms himself — or commits a violent crime and is imprisoned. Hoff thinks prison is where he's headed — he's in jail, charged in an unarmed bank robbery.

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Online:

American Academy of Child & Adolescent Psychiatry: http://www.aacap.org

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AP Medical Writer Lindsey Tanner can be reached at http://www.twitter.com/LindseyTanner

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Reaction to the death of actor Jack Klugman

Celebrities on Monday reacted to the death of "Odd Couple" star Jack Klugman, who died Monday at age 90. Here are samples of sentiments expressed on Twitter:

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"R.I.P. Jack Klugman, Oscar, Quincy a man whose career spanned almost 50 years. I first saw him on the Twilight Zone. Cool guy wonderful actor." — Whoopi Goldberg.

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"You made my whole family laugh together." — Actor Jon Favreau, of "Swingers," ''Iron Man" and other films.

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"I worked with Jack Klugman several years ago. He was a wonderful man and supremely talented actor. He will be missed" — Actor Max Greenfield, of the "New Girl" on Fox.

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"So sorry to hear that Jack Klugman passed away. I learned a lot, watching him on television" — Dan Schneider, creator of Nickelodeon TV shows "iCarly," ''Drake and Josh" ''Good Burger," ''Drake & Josh."

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Rumored iPad 5 to be thinner

By Chris O'Brien

1:03 p.m. CST, December 24, 2012

That iPad 3 you got last March? Forget it. It's like the eight-track tape  of tablets. (Kids: Ask your parents what that means.) Even that iPad 4 you're about to unwrap Christmas morning that you think is so darn new is about to become yesterday's news. 

At least, that is, if the latest iPad rumors are true. According to the Japanese blog Macotakara, the next iPad is due to hit in March. At which time, all previous versions of the iPad will feel like bricks.

QUIZ: What set the Internet on fire in 2012? 

The site reports that the fifth version of the iPad will be thinner and lighter than the last iPad. For those of you hoping that Apple's next version of the iPad would be heavier and clunkier, this is no doubt crushing news.

For the rest of the planet, however, this is pretty much what you'd expect from Apple. Macotakara says its sources say the next iPad will be 2 millimeters thinner and 17 millimeters narrower. 

If true, it marks a continuation of the accelerated product update cycle that kicked into gear this past year under Apple CEO Tim Cook. 

According to 9to5Mac.com, if the dimensions are correct, "The new supposed thinness would mean the next iPad is nearly as thin as the 7.2mm thin iPad mini."

Speaking of the Mini, Macotakara reports that Apple is cooking up a retina screen for the next iPad mini. 

Here's the real thing iPad owners need to fear: How long will Apple continue to support those older iPads? It already doesn't let owners of the first iPad download new versions of iOS. 

ALSO: 

Yelp's new weapon against fake reviews: User alerts

Google Maps returns to iPhone; iPad app coming soon

Scam watch: Fake news sites, smartphone viruses, BBB scam stopper

Follow me on Twitter @obrien.

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Police: NY gunman set 'trap' for firefighters

An ex-con set a car and a house ablaze in his lakeside neighborhood to lure firefighters, then opened fire on them, killing two, engaging in a shootout with police and committing suicide while several houses burned. Authorities used an armored vehicle to evacuate the area.

The gunman fired at the four firefighters when they arrived shortly after 5:30 a.m. at the blaze in Webster, a suburb of Rochester on Lake Ontario, town Police Chief Gerald Pickering said. The first police officer who arrived chased the suspect and exchanged gunfire, authorities said.

“It does appear it was a trap” for the first responders to the fire, Pickering said at a midday news conference. His motive wasn't clear.

The gunman, William Spengler, had served more than 17 years in prison for beating his 92-year-old grandmother to death in 1980 at the house next to where Monday's attack happened, Pickering said at a briefing later in the afternoon. Spengler, 62, was paroled in 1998 and had led a quiet life since, authorities said. Convicted felons are not allowed to possess weapons.

Police say lay in wait for the firefighters' arrival, then opened fire from outdoors, probably with a rifle and from atop an earthen berm.

Two firefighters, one of whom was also a town police lieutenant, died at the scene, and two others were hospitalized. A fifth man who was passing by was also injured. The police officer who exchanged gunfire with Spengler and “in all likelihood saved many lives,” Pickering said.

Seven houses were destroyed in the blaze, Pickering said, and police have not been able to get inside the houses to determine if there are any more victims. They said Spengler's 67-year-old sister Cheryl Spengler was unaccounted for. He lived in the house with his sister and mother, Arline, who died in October.

The West Webster Fire District learned of the fire early Monday after a report of a car and house on fire on Lake Road, on a narrow peninsula where Irondequoit Bay meets Lake Ontario, Monroe County Sheriff Patrick O'Flynn said.

The fire appeared from a distance as a pulsating ball of flame glowing against the early morning sky, flames licking into treetops and reflecting on the water, with huge bursts of smoke billowing away in a brisk wind.

Two of the firefighters arrived on a fire engine and two in their own vehicles, Pickering said. After Spengler fired, one of the wounded men managed to flee, but the other three couldn't because of flying gunfire.

A police armored vehicle was used to recover two of the men, and eventually it evacuated 33 people from nearby homes, the police chief said. The gunfire initially kept firefighters from battling the blazes.

“These people get up in the middle of the night to go put out fires; they don't expect to be shot and killed,” Pickering said.

The dead men were identified as Police Lt. Michael Chiapperini, 43, the Webster Police Department's public information officer; and Tomasz Kaczowka, also a 911 dispatcher, whose age was not released.

Pickering described Chiapperini as a “lifetime firefighter” with nearly 20 years with the department, and called Kaczowka a “tremendous young man.”

The two wounded firefighters, Joseph Hofsetter and Theodore Scardino, were in guarded condition in the intensive care unit at Strong Memorial Hospital, authorities said. Both were awake and alert and are expected to recover.

Hofsetter, also a full-timer with the Rochester Fire Department, was hit once in the pelvis, and the bullet lodged in his spine, authorities said. Scardino was hit in the chest and knee.

Monday's shooting and fires were in a neighborhood of seasonal and year-round homes set close together across the road from the lakeshore. The area is popular with recreational boaters but is normally quiet this time of year.

“We have very few calls for service in that location,” Pickering said. “Webster is a tremendous community. We are a safe community, and to have a tragedy befall us like this is just horrendous.”

O'Flynn lamented the violence, which comes on the heels of other shootings including the massacre of 20 students and six adults at Sandy Hook Elementary School in Newtown, Conn.

“It's sad to see that that this is becoming more commonplace in communities across the nation,” O'Flynn said.

Gov. Andrew Cuomo said the State Police and Office of Emergency Management were working with local authorities.

“Volunteer firefighters and police officers were injured and two were taken from us as they once again answered the call of duty,” Cuomo said in a statement. “We as the community of New York mourn their loss as now two more families must spend the holidays without their loved ones.”

Webster, a middle-class suburb, now is the scene of violence linked to house fires for two Decembers in a row.

Last Dec. 7, authorities say, a 15-year-old boy doused his home with gasoline and set it ablaze, killing his father and two brothers, 16 and 12. His mother and 13-year-old sister escaped with injuries. He is being prosecuted as an adult.

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Instagram furor triggers first class action lawsuit

SAN FRANCISCO (Reuters) - Facebook's Instagram photo sharing service has been hit with what appears to be the first civil lawsuit to result from changed service terms that prompted howls of protest last week.

In a proposed class action lawsuit filed in San Francisco federal court on Friday, a California Instagram user leveled breach of contract and other claims against the company.

"We believe this complaint is without merit and we will fight it vigorously," Facebook spokesman Andrew Noyes said in an e-mail.

Instagram, which allows people to add filters and effects to photos and share them easily on the Internet, was acquired by Facebook earlier this year for $715 million.

In announcing revised terms of service last week, Instagram spurred suspicions that it would sell user photos without compensation. It also announced a mandatory arbitration clause, forcing users to waive their rights to participate in a class action lawsuit except under very limited circumstances.

The current terms of service, in effect through mid-January, contain no such liability shield.

The backlash prompted Instagram founder and CEO Kevin Systrom to retreat partially a few days later, deleting language about displaying photos without compensation.

However, Instagram kept language that gave it the ability to place ads in conjunction with user content, and saying "that we may not always identify paid services, sponsored content, or commercial communications as such." It also kept the mandatory arbitration clause.

The lawsuit, filed by San Diego-based law firm Finkelstein & Krinsk, says customers who do not agree with Instagram's terms can cancel their profile but then forfeit rights to photos they had previously shared on the service.

"In short, Instagram declares that 'possession is nine-tenths of the law and if you don't like it, you can't stop us,'" the lawsuit says.

Kurt Opsahl, a senior staff attorney with the Electronic Frontier Foundation who had criticized Instagram, said he was pleased that the company rolled back some of the advertising terms and agreed to better explain their plans in the future.

However, he said the new terms no longer contain language which had explicitly promised that private photos would remain private. Facebook had engendered criticism in the past, Opsahl said, for changing settings so that the ability to keep some information private was no longer available.

"Hopefully, Instagram will learn from that experience and refrain from removing privacy settings," Opsahl said.

The civil lawsuit in U.S. District Court, Northern District of California, is Lucy Funes, individually and on behalf of all others similarly situated vs. Instagram Inc., 12-cv-6482.

(Reporting by Dan Levine; Editing by Dan Grebler)

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Pagano back to coach Colts after cancer treatment

INDIANAPOLIS (AP) — Chuck Pagano stepped to the podium Monday, hugged his team owner, thanked his family for its support and wiped a tear from his eye.

He might, finally, turn out the lights in his office, too.

Nearly three months to the day after being diagnosed with leukemia, the Colts' first-year coach returned to a team eager to reunite with a boss healthy enough to go back to work.

"I told you my best day of my life was July 1, 1989," Pagano said, referring to his wedding date. "Today was No. 2. Getting to pull up, drive in, get out of my car, the key fob still worked. I was beginning to question whether it would or not. When I asked for Bruce to take over, I asked for him to kick some you-know-what and to do great. Damn Bruce, you had to go and win nine games? Tough act to follow. Tough act to follow. Best in the history of the NFL. That's what I have to come back to."

The comment turned tears into the laughter everyone expected on such a festive occasion.

For Pagano and the Colts, Monday morning was as precious as anyone could have imagined when Pagano took an indefinite leave to face the biggest opponent of his life, cancer.

In his absence, all the Colts was win nine of 12 games, make a historic turnaround and clinch a playoff spot all before Sunday's regular-season finale against Houston, which they pegged as the day they hoped to have Pagano back. If all goes well at practice this week, Pagano will be on the sideline for the first time since a Week 3 loss to Jacksonville.

Pagano endured three rounds of chemotherapy to put his cancer in remission.

That Pagano's return came less than 24 hours after Indy (10-5) locked up the No. 5 seed in the AFC and the day before Christmas seemed fitting, too.

"I know Chuck is ready for this challenge. In speaking to his doctor multiple times, I know that the time is right for him to grab the reins, get the head coaching cap on and begin the journey," owner Jim Irsay said. "It's been a miraculous story. It really is a book. It's a fairytale. It's a Hollywood script. It's all those things but it's real."

The reality is that he's returning to a vastly different team than the one he turned over to Arians, his long-time friend and first assistant coaching hire.

Back then, the Colts were 1-2 and most of the so-called experts had written them off as one of the league's worst teams. Now, they're ready to show the football world that they can be just as successful under Pagano as they were under Arians, who tied the NFL record for wins after a midseason coaching change.

Pagano also has changed.

The neatly-trimmed salt-and-pepper hair and trademark goatee that were missing in November have slowly returned, and the thinner man who appeared to be catching his breath during a postgame speech in early November, looked and sounded as good as ever Monday.

He repeatedly thanked fans for their prayers and letters, the organization and his family for their unwavering help and promised to provide comfort and support to other people who are facing similar fights. During one poignant moment that nearly brought out tears again, Pagano even recounted a letter sent to him by a 9-year-old child who suggested he suck on ice chips and strawberry Popsicles in the hospital and advised him to be nice to the nurses regardless of how he felt — and he never even paused.

"I feel great, my weight is back, my energy is back and again, it's just a blessing to be back here," Pagano said.

In the minds of Colts players and coaches, Pagano never really left.

He continually watched practice tape and game film on his computer, used phone calls and text messages to regularly communicate with players and occasionally delivered a pregame or postgame speech to his team.

"He texted me and called me so much, it was like he was standing there in my face every day," said receiver Reggie Wayne, who has been friends with Pagano since the two were working together at the University of Miami.

But the Colts found plenty of other ways to keep Pagano's battle in the forefront.

They began a fundraising campaign for leukemia research, calling it Chuckstrong. Players had stickers with the initials CP on their locker room nameplates, and Arians wore an orange ribbon on his baseball cap during games. Orange is the symbolic color for leukemia. At one point, nearly three dozen players shaved their heads to show their ailing coach they were with him.

That's not all.

Arians and first-year general manager Ryan Grigson decided to leave the lights on in Pagano's office until he returned. Pagano noted the team even installed plastic clips to make sure those lights were not mistakenly turned off while he was gone. Those clips were removed when Pagano arrived Monday morning.

And Arians said nobody sat in the front seat of the team bus.

"He's always been our head coach," Arians said.

So after getting medical clearance from his oncologist, Dr. Larry Cripe, to return with no restrictions, Pagano couldn't wait to get to the office Monday morning.

Arians arrived at 7 a.m., three hours early for the scheduled team meeting. By then, Pagano had already driven past the inflatable Colts player with the words "Welcome Back Chuck" printed on its chest and was back in his office preparing for the Texans.

Players showed up a couple of hours later, and when the torch was passed from Arians back to Pagano, players gave their returning coach a standing ovation that Wayne said was well-deserved.

All Pagano wants to do now is emulate the success Arians and his players have had this season.

"I asked him (Arians) if he would lead this team and this ballclub and this organization and take over the reins," Pagano said. "What a masterful, masterful job you did Bruce. You carried the torch and all you went out and did was win nine ballgames. You got us our 10th win yesterday and you got us into the playoffs. You did it with dignity and you did it with class. You're everything that I always knew you were and more."

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Online: http://pro32.ap.org/poll and http://twitter.com/AP_NFL

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