11.	Income Taxes

Income taxes have been based on the following components of “Earnings Before Provision for Income Taxes and Discontinued Operations” in the Consolidated Statements of Earnings:

	Years Ended December 31,
	2011		2010		2009
Domestic	$	582,510	$	443,655	$	259,121
Foreign		512,654		455,549		235,288
	$	1,095,164	$	899,204	$	494,409

Income tax expense (benefit) for the years ended December 31, 2011, 2010 and 2009 is comprised of the following:

	Years Ended December 31,
	2011			2010			2009
Current:
U.S. Federal	$	159,888		$	29,622		$	77,295
State and local		(12,016	)		6,363			3,718
Foreign		107,220			105,234			67,204
Total current - continuing		255,092			141,219			148,217

Deferred:
U.S. Federal	$	4,048		$	92,661		$	(16,395	)
State and local		(2,533	)		97			219
Foreign		(7,808	)		(25,524	)		(11,055	)
Total deferred - continuing		(6,293	)		67,234			(27,231	)
Total expense - continuing	$	248,799		$	208,453		$	120,986

Differences between the effective income tax rate and the U.S. Federal income statutory rate are as follows:

	Years Ended December 31,
	2011		2010		2009
U.S. Federal income tax rate	35.0	%	35.0	%	35.0	%
State and local taxes, net of Federal income tax benefit	1.6		1.2		1.3
Foreign operations tax effect	(7.9)		(8.3)		(5.3)
Subtotal	(6.3)		(7.1)		(4.0)
R&E tax credits	(0.3)		(0.4)		(0.4)
Domestic manufacturing deduction	(1.5)		(0.8)		(0.9)
Foreign tax credits	0.3		(0.5)		1.1
Branch losses	-		(0.5)		(1.1)
Release of valuation allowance	(0.9)		-		-
Resolution of tax contingencies	(4.9)		(4.2)		(6.8)
Other, principally non-tax deductible items	1.3		1.7		1.6
Effective rate from continuing operations	22.7	%	23.2	%	24.5	%

The tax effects of temporary differences that give rise to future deferred tax assets and liabilities are as follows:

	December 31, 2011			December 31, 2010
Deferred Tax Assets:
Accrued compensation, principally postretirement and other employee benefits	$	166,848		$	115,839
Accrued expenses, principally for state income taxes, interest and warranty		55,006			63,317
Net operating loss and other carryforwards		26,277			68,558
Inventories, principally due to reserves for financial reporting purposes
and capitalization for tax purposes		19,044			23,261
Accounts receivable, principally due to allowance for doubtful accounts		5,223			6,768
Accrued insurance		3,947			10,433
Prepaid pension assets		3,415			1,619
Long-term liabilities, principally warranty, environmental, and exit costs		796			759
Other assets		13,378			9,993
Total gross deferred tax assets		293,934			300,547
Valuation allowance		(22,724	)		(38,136	)
Total deferred tax assets	$	271,210		$	262,411

Deferred Tax Liabilities:
Intangible assets, principally due to different tax and financial
reporting bases and amortization lives	$	(577,275	)	$	(431,317	)
Plant and equipment, principally due to differences in depreciation		(56,751	)		(45,797	)
Accounts receivable		(6,442	)		(7,074	)
Total gross deferred tax liabilities		(640,468	)		(484,188	)
Net deferred tax liability	$	(369,258	)	$	(221,777	)

Classified as follows in the consolidated balance sheets:

Current deferred tax asset	$	41,905		$	82,934
Non-current deferred tax liability		(411,163	)		(304,711	)
	$	(369,258	)	$	(221,777	)

As of December 31, 2011 the Company had non-U.S loss carry-forwards of $71.2 million. The Company had loss carry-forwards for U.S. federal and non-U.S. purposes as of December 31, 2010 of $1.2 million and $52.7 million, respectively. The entire balance of the 2011 non-U.S. losses is available to be carried forward, with $15.4 million of these losses beginning to expire during the years 2012 through 2031. The remaining $55.8 million of such losses can be carried forward indefinitely.

The Company has loss carry-forwards for state purposes as of December 31, 2011 and 2010 of $160.9 million and $211.8 million, respectively. The state loss carry-forwards are available for use by the Company between 2012 and 2031.

As of December 31, 2010, the Company had U.S. foreign tax credit carry-forwards of $24.5 million, research and development credits of $3.9 million, and alternative minimum tax credits of $3.1 million. The Company had no U.S. foreign tax credit carry-forwards, research and development tax credit carry-forwards, or alternative minimum tax credits at December 31, 2011.

The Company maintains valuation allowances by jurisdiction against the deferred tax assets related to certain of these carry-forwards as utilization of these tax benefits is not assured for certain jurisdictions.

The Company has not provided for U.S. federal income taxes or tax benefits on the undistributed earnings of its international subsidiaries because such earnings are reinvested and it is currently intended that they will continue to be reinvested indefinitely. At December 31, 2011, the Company has not provided for federal income taxes on earnings of approximately $1.4 billion from its international subsidiaries.

Unrecognized Tax Benefits

The Company files federal income tax returns, as well as multiple state, local and non-U.S. jurisdiction tax returns. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service (“IRS”) for years through 2008. All significant state, local, and international matters have been concluded for years through 2005 and 2003, respectively. While the Company believes additional uncertain tax positions will be settled within the next twelve months, an estimate cannot be made due to the uncertainties associated with the resolution of these matters.

The following table is a reconciliation of the beginning and ending balances of the Company's unrecognized tax benefits:

	Continuing			Discontinued			Total
Unrecognized tax benefits at January 1, 2009	$	202,162		$	49,544		$	251,706
Additions based on tax positions related to the current year		45,891			39,722			85,613
Additions for tax positions of prior years		5,607			2,756			8,363
Reductions for tax positions of prior years		(8,855	)		(2,656	)		(11,511	)
Settlements		(40,704	)		(7,079	)		(47,783	)
Lapse of statutes		(6,979	)		(2,843	)		(9,822	)
Unrecognized tax benefits at December 31, 2009		197,122			79,444			276,566
Additions based on tax positions related to the current year		22,324			242			22,566
Additions for tax positions of prior years		15,258			-			15,258
Reductions for tax positions of prior years		(39,824	)		(6,775	)		(46,599	)
Settlements		(8,152	)		(17,804	)		(25,956	)
Lapse of statutes		(7,521	)		(133	)		(7,654	)
Unrecognized tax benefits at December 31, 2010		179,207			54,974			234,181
Additions based on tax positions related to the current year		11,575			246			11,821
Additions for tax positions of prior years		16,595			12			16,607
Reductions for tax positions of prior years		(43,853	)		(9,012	)		(52,865	)
Settlements		(7,042	)		(3,100	)		(10,142	)
Lapse of statutes		(6,197	)		(216	)		(6,413	)
Unrecognized tax benefits at December 31, 2011	$	150,285	(A)	$	42,904		$	193,189

_________

(A)

If recognized, the net amount of potential tax benefits that would impact the Company's effective tax rate is $125.1 million. During the years ended December 31, 2011, 2010, and 2009, the Company recorded potential interest and penalty expense (income) of $(9.1) million, $1.5 million and $5.0 million, respectively, related to its unrecognized tax benefits as a component of provision for income taxes. The Company had accrued interest and penalties of $34.2 million at December 31, 2011 and $45.6 million at December 31, 2010, which are not included in the above table.