Note 9: Income tax provision

The components of the income tax provision for continuing operations were as follows:

	2011		2010		2009
Current tax provision:
Federal	$	49,702	$	49,909	$	37,945
State		9,168		8,424		4,323
Foreign		3,269		3,859		1,349
Total		62,139		62,192		43,617
Deferred tax provision		9,350		20,362		12,039
Provision for income taxes	$	71,489	$	82,554	$	55,656

The effective tax rate on pre-tax income from continuing operations reconciles to the U.S. federal statutory tax rate of 35% as follows:

	2011		2010		2009
Income tax at federal statutory rate		35.0%		35.0%		35.0%
State income tax expense, net of federal income tax benefit		2.8%		2.8%		3.5%
Change in unrecognized tax benefits, including interest and penalties		0.5%		(1.3% )		0.1%
Non-deductible portion of goodwill impairment charge (see Note 7)		-		-		2.9%
Qualified production activity deduction		(2.4% )		(2.4%)		(1.8%)
Impact of health care legislation on deferred income taxes		(1.2% )		1.7%		-
Receivables for prior year tax returns(1)		(0.8% )		-		(2.2%)
Other		(0.8% )		(0.8%)		(1.6%)
Income tax provision		33.1%		35.0%		35.9%

(1) Relates to amendments to prior year income tax returns claiming refunds primarily associated with foreign tax returns for 2011 and federal and state income tax credits for 2009.

Our income tax provision for 2010 included a $4,063 charge resulting from the Health Care and Education Reconciliation Act of 2010, which was signed into law in March 2010 and requires that certain tax deductions after 2012 be reduced by the amount of Medicare Part D subsidy payments. Prior to this law change, the subsidy was to be disregarded in all future years when computing tax deductions. This resulted in a reduction in the deferred tax asset associated with our postretirement benefit plan. During 2011, our income tax provision was reduced $2,539 by actions taken to restore a portion of the deferred tax asset attributable to the receipt of Medicare Part D subsidy payments.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

	Unrecognized tax benefits
Balance, December 31, 2008	$	11,457
Additions for tax positions of current year		606
Additions for tax positions of prior years		2,316
Reductions for tax positions of prior years		(2,152	)
Settlements		(3,186	)
Lapse of statutes of limitations		(1,063	)
Balance, December 31, 2009		7,978
Additions for tax positions of current year		641
Additions for tax positions of prior years		1,406
Fair value of acquired tax positions (see Note 4)		1,069
Reductions for tax positions of prior years		(2,634	)
Settlements		(640	)
Lapse of statutes of limitations		(1,282	)
Balance, December 31, 2010		6,538
Additions for tax positions of current year		510
Additions for tax positions of prior years		1,646
Reductions for tax positions of prior years		(219	)
Settlements		(1,507	)
Lapse of statutes of limitations		(732	)
Balance, December 31, 2011	$	6,236

If the unrecognized tax benefits as of December 31, 2011 were recognized in our consolidated financial statements, $5,152 would positively affect income tax expense and our related effective tax rate. Accruals for interest and penalties, excluding the tax benefits of deductible interest, were $1,497 as of December 31, 2011 and $1,382 as of December 31, 2010. Our income tax provision included expense for interest and penalties of $639 in 2011, and credits to our income tax provision for interest and penalties of $837 in 2010 and $446 in 2009. Within the next 12 months, it is reasonably possible that our unrecognized tax benefits will change in the range of a decrease of $4,500 to an increase of $700 as we attempt to settle certain federal and state tax matters or as federal and state statutes of limitations expire.

The statute of limitations for federal tax assessments for 2006 and prior years has closed. Our federal income tax returns through 2007 have been audited by the IRS, our 2008 and 2009 returns are currently being audited, and our returns for 2010 and 2011 remain subject to IRS examination. In general, income tax returns for the years 2007 through 2011 remain subject to examination by foreign, state and city tax jurisdictions. In the event that we have determined not to file income tax returns with a particular state or city, all years remain subject to examination by the tax jurisdiction.

The ultimate outcome of tax matters may differ from our estimates and assumptions. Unfavorable settlement of any particular issue would require the use of cash and could result in increased income tax expense. Favorable resolution would result in reduced income tax expense.

Tax-effected temporary differences which gave rise to deferred tax assets and liabilities as of December 31 were as follows:

	2011					2010
	Deferred tax assets			Deferred tax liabilities		Deferred tax assets			Deferred tax liabilities
Goodwill	$	-		$	40,761	$	-		$	34,818
Intangible assets		-			28,831		-			33,774
Property, plant and equipment		-			6,080		-			4,201
Deferred advertising costs		-			5,769		-			5,964
Early extinguishment of debt (see Note 13)		-			3,775		-			3,784
Employee benefit plans		29,776			-		29,593			-
Reserves and accruals		6,574			-		5,457			-
Net operating loss and tax credit carryforwards		3,366			-		5,760			-
Inventories		2,800			-		2,771			-
Federal benefit of state uncertain tax positions		1,776			-		1,719			-
Interest rate lock agreements (see Note 6)		1,751			-		2,709			-
All other		1,748			4,558		1,370			3,061
Total deferred taxes		47,791			89,774		49,379			85,602
Valuation allowances		(608	)		-		(1,139	)		-
Net deferred taxes	$	47,183		$	89,774	$	48,240		$	85,602

Deferred U.S. and state income taxes have not been recognized on unremitted earnings of our foreign subsidiaries, as these amounts are intended to be reinvested indefinitely in the operations of those subsidiaries.

The valuation allowances as of December 31, 2011 related primarily to the portion of our operating loss carryforwards in Ireland which we do not expect to fully realize. As of December 31, 2010, the valuation allowances related primarily to operating loss carryforwards in Canada which we reversed during 2011, as we now expect to realize the loss carryforwards in 2012 and/or in future years.

As of December 31, 2011, we had operating loss carryforwards of $4,088 in Ireland which do not expire, and we had operating loss carryforwards of $3,689 in Canada, which expire at various dates between 2013 and 2031. We also had state net operating loss carryforwards of $19,026 which expire at various dates up to 2030 and federal alternative minimum tax credit carryforwards of $586 which have no expiration date.