12. Income taxes

Significant components of the provision for income taxes attributable to operations consist of the following:

	Year ended December 31,
(in thousands)	2012			2011			2010
Current
Federal	$	11,481		$	(3,795	)	$	16,664
State		(1,045	)		(1,110	)		187
International		103			74			102
Total current		10,539			(4,831	)		16,953
Deferred
Federal		3,758			19,055			10,003
State		(375	)		1,606			(774	)
Total deferred		3,383			20,661			9,229
Total provision for income taxes	$	13,922		$	15,830		$	26,182

The Company's net deferred tax asset consists of the following:

	December 31,
(in thousands)	2012			2011
Net operating loss carryforward	$	26,102		$	28,621
Research and development carryforward		3,556			3,556
Stock compensation		5,289			3,666
Foreign deferrals		64,009			61,255
Deferred revenue		-			485
Other		9,005			9,596
Deferred tax asset		107,961			107,179
Fixed assets		(22,040	)		(21,760	)
Other		(6,158	)		(6,902	)
Deferred tax liability		(28,198	)		(28,662	)
Valuation allowance		(67,412	)		(62,783	)
Net deferred tax asset	$	12,351		$	15,734

The Company currently has approximately $43.9 million in net operating loss carryforwards along with $3.6 million in research and development tax credit carryforwards for U.S. federal tax purposes that will begin to expire in 2026 and 2023, respectively. The U.S. federal tax carryforwards are recorded with no valuation allowance. The Company has $200.5 million in state net operating loss carryforwards, primarily in Maryland, that will begin to expire in 2018. The Company has approximately $223.3 million in net operating losses from foreign jurisdictions that will have an indefinite life unless the foreign entities have a change in the nature or conduct of the business in the three years following a change in ownership. These foreign net operating losses are recorded with a valuation allowance. The use of any of these net operating loss and research and development tax credit carryforwards may be restricted due to changes in the Company's ownership.

The provision for income taxes differs from the amount of taxes determined by applying the U.S. federal statutory rate to loss before provision for income taxes as a result of the following:

	Year ended December 31,
(in thousands)	2012			2011			2010
US	$	52,391		$	66,756		$	111,775
International		(14,945	)		(27,907	)		(33,895	)
Earnings before taxes on income		37,446			38,849			77,880

Federal tax at statutory rates	$	13,106		$	13,597		$	27,258
State taxes, net of federal benefit		(2,079	)		46			666
Impact of foreign operations		(3,604	)		(2,371	)		(7,713	)
Change in valuation allowance		4,629			3,193			6,394
Effect of foreign rates		(22	)		(12	)		(30	)
Tax credits		(2,904	)		(1,405	)		(1,754	)
Other differences		139			556			398
Permanent differences		4,657			2,226			963
Provision for income taxes	$	13,922		$	15,830		$	26,182

During the year ended December 31, 2012, the Company corrected certain immaterial prior period errors for the years ending December 31, 2011 and 2010 of approximately $2.4 million and $909,000, respectively. These immaterial errors related to the cash flow presentation of the excess tax benefit attributed to the exercise of non-qualified stock options and restricted stock units. The immaterial errors had no impact on the Company's consolidated cash flows, consolidated statements of income and comprehensive income or the consolidated balance sheets. The correction of the errors is reflected as a reduction of operating cash flow from operating activities and an increase in cash flow from financing activities.

The Company recognizes interest in interest expense and recognizes potential penalties related to unrecognized tax benefits in selling, general and administrative expense. The Company accrued approximately $25,000 and $26,000, for the payment of interest and penalties as of December 31, 2012 and 2011, respectively. Of the total unrecognized tax benefits recorded at December 31, 2012 and 2011, $153,000 and $104,000, respectively is classified as a current liability and $863,000 and $952,000, respectively, is classified as a non-current liability on the balance sheet. As of December 31, 2012 and 2011, the Company estimated that approximately, $75,000 and $50,000, respectively, of unrecognized tax benefits will reverse within the next twelve months.

The table below presents the gross unrecognized tax benefits activity for 2012, 2011 and 2010:

(in thousands)
Gross unrecognized tax benefits at January 1, 2010	$	260
Increases for tax positions for prior years		16
Decreases for tax positions for prior years		(175	)
Increases for tax positions for current year		849
Settlements		-
Lapse of statute of limitations		-
Gross unrecognized tax benefits at December 31, 2010		950
Increases for tax positions for prior years		167
Decreases for tax positions for prior years		(61	)
Increases for tax positions for current year		-
Settlements		-
Lapse of statute of limitations		-
Gross unrecognized tax benefits at December 31, 2011		1,056
Increases for tax positions for prior years		25
Decreases for tax positions for prior years		(65	)
Increases for tax positions for current year		-
Settlements		-
Lapse of statute of limitations		-
Gross unrecognized tax benefits at December 31, 2012	$	1,016

When resolved, substantially all of these reserves would impact the effective tax rate.

The Company's federal and state income tax returns for the tax years 2009 to 2011 remain open to examination. The Company's tax returns in the United Kingdom remain open to examination for the tax years 2011 to 2004, and tax returns in Germany remain open indefinitely.

As of December 31, 2012, the Company's 2008, 2009 and 2010 federal income tax returns are under audit by the Internal Revenue service. The Company believes appropriate provisions have been made for any outstanding issues.