TAXES ON INCOME

The Company's pre-tax income from continuing operations consisted of $1.05 billion, $836 million and $1.16 billion from U.S. operations and $17.9 million, $12.5 million and $12.8 million from foreign operations for the years ended December 31, 2012, 2011 and 2010, respectively.

The components of income tax expense for 2012, 2011 and 2010 were as follows:



	2012			2011			2010
Current:
Federal	$	332,053		$	265,865		$	349,755
State and local	60,708			60,273			93,229
Foreign	2,649			2,666			4,283

Deferred:
Federal	13,298			37,245			(6,828		)
State and local	(6,152		)	(11,073		)	(10,782		)
Foreign	(659		)	(274		)	470

Total	$	401,897		$	354,702		$	430,127

A reconciliation of the federal statutory rate to the Company's effective tax rate for 2012, 2011 and 2010 was as follows:



	2012		2011		2010

Tax provision at statutory rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	3.4		3.7		4.0
Impact of foreign operations	(0.3	)	—		—
Tax credits	(0.2	)	(0.5	)	(0.3	)
Charge associated with settlement of certain legal claims (see Note 17), a portion for which a tax benefit has not been recorded	—		5.2		—
Transaction costs associated with business acquisitions (see Note 5), a portion for which a tax benefit has not been recorded	—		0.3		—
Non-deductible expenses, primarily meals and entertainment expenses	0.3		0.3		0.2
Impact of noncontrolling interests	(1.3	)	(1.2	)	(1.2	)
Other, net	0.7		(1.0	)	(1.1	)

Effective tax rate	37.6	%	41.8	%	36.6	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at December 31, 2012 and 2011 were as follows:



	2012			2011
Current deferred tax assets:
Accounts receivable reserves	$	90,784		$	85,485
Liabilities not currently deductible	83,425			67,843

Total current deferred tax assets	$	174,209		$	153,328

Non-current deferred tax assets (liabilities):
Liabilities not currently deductible	$	139,869		$	151,621
Stock-based compensation	58,253			72,262
Capitalized R&D expense	10,413			16,899
Net operating loss carryforwards, net of valuation allowance	104,257			121,234
Depreciation and amortization	(484,773		)	(528,129		)

Total non-current deferred tax liabilities, net	$	(171,981	)	$	(166,113	)

At December 31, 2012 and 2011, non-current deferred tax assets of $15 million and $18 million, respectively, are recorded in other long-term assets in the consolidated balance sheet. At December 31, 2012 and 2011, non-current deferred tax liabilities of $187 million and $184 million, respectively, are included in other long-term liabilities in the consolidated balance sheet.

As of December 31, 2012, the Company had estimated net operating loss carryforwards for federal and state income tax purposes of $188 million and $987 million, respectively, which expire at various dates through 2032. Estimated net operating loss carryforwards for foreign income tax purposes are $49 million at December 31, 2012, some of which can be carried forward indefinitely while others expire at various dates through 2023. As of December 31, 2012 and 2011, deferred tax assets associated with net operating loss carryforwards of $137 million and $152 million, respectively, have each been reduced by a valuation allowance of $32 million and $31 million, respectively.

Income taxes payable including those classified in other long-term liabilities in the consolidated balance sheets at December 31, 2012 and 2011, were $251 million and $164 million, respectively.

The total amount of unrecognized tax benefits as of and for the years ended December 31, 2012, 2011 and 2010 consisted of the following:



	2012			2011			2010

Balance, beginning of year	$	194,861		$	151,554		$	126,454
Additions:
For tax positions of current year	12,142			63,343			20,904
For tax positions of prior years	10,614			9,196			28,140
Reductions:
Changes in judgment	(1,720		)	(13,543		)	(13,467		)
Expirations of statutes of limitations	(6,061		)	(2,952		)	(10,477		)
Settlements	(10,404		)	(12,737		)	—

Balance, end of year	$	199,432		$	194,861		$	151,554

The contingent liabilities for tax positions primarily relate to uncertainties associated with the realization of tax benefits derived from the allocation of income and expense among state jurisdictions, the characterization and timing of certain tax deductions associated with business combinations, income and expenses associated with certain intercompany licensing arrangements, and the deductibility of certain settlement payments.

The total amount of unrecognized tax benefits as of December 31, 2012, that, if recognized, would affect the effective income tax rate from continuing operations is $107 million. Based upon the expiration of statutes of limitations, settlements and/or the conclusion of tax examinations, the Company believes it is reasonably possible that the total amount of unrecognized tax benefits may decrease by up to $8 million within the next twelve months.

Accruals for interest expense on contingent tax liabilities are classified in income tax expense in the consolidated statements of operations. Accruals for penalties have historically been immaterial. Interest expense included in income tax expense in 2012, 2011 and 2010 was approximately $3 million, $3 million and $2 million, respectively. As of December 31, 2012 and 2011, the Company has approximately $13 million and $11 million, respectively, accrued, net of the benefit of a federal and state deduction, for the payment of interest on uncertain tax positions.

The recognition and measurement of certain tax benefits includes estimates and judgment by management and inherently involves subjectivity. Changes in estimates may create volatility in the Company's effective tax rate in future periods and may be due to settlements with various tax authorities (either favorable or unfavorable), the expiration of the statute of limitations on some tax positions and obtaining new information about particular tax positions that may cause management to change its estimates.

In the regular course of business, various federal, state and local and foreign tax authorities conduct examinations of the Company's income tax filings and the Company generally remains subject to examination until the statute of limitations expires for the respective jurisdiction. The Internal Revenue Service (“IRS”) has completed its examinations of the Company's consolidated federal income tax returns up through and including the 2007 tax year. At this time, the Company does not believe that there will be any material additional payments beyond its recorded contingent liability reserves that may be required as a result of these tax audits. As of December 31, 2012, a summary of the tax years that remain subject to examination for the Company's major jurisdictions are:

United States - federal 2008 - 2012

United States - various states 2005 - 2012