Note H—Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2011, 2010 and 2009, consisted of the following (in thousands):


	Years Ended December 31,
	2011		2010		2009
Current:
Federal	$	48,068	$	18,085	$	14,571
State		11,969		7,412		4,008
Foreign		23,101		16,232		5,169
Deferred:
Federal and state		15,117		3,654		10,412
Foreign		2,039		3,716		(4,660	)

	$	100,294	$	49,099	$	29,500

Income before the provision for income taxes for the years ended December 31, 2011, 2010 and 2009, consisted of the following (in thousands):


	Years Ended December 31,
	2011		2010		2009
Domestic	$	202,210	$	88,065	$	66,756
Foreign		48,006		27,103		7

	$	250,216	$	115,168	$	66,763

The income taxes shown above varied from the statutory federal income tax rates for these periods as follows:


	Years Ended December 31,
	2011			2010			2009
Federal U.S. income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		3.4			2.0			2.0
Tax-free interest income		—			—			(0.3	)
Non-deductible expenses		1.3			2.7			4.8
Non-U.S. income taxed at different rates, net of foreign tax credits		2.2			3.4			8.0
Federal tax credits		(1.2	)		(1.3	)		(2.5	)
Tax impact of uncertain tax positions		(0.4	)		0.2			(5.1	)
Other, net		(0.2	)		0.6			2.3

Effective tax rate		40.1	%		42.6	%		44.2	%

The deferred portion of the tax provision (benefit) consisted of the following (in thousands):


	Years Ended December 31,
	2011			2010			2009
Amortization of franchise rights	$	514		$	570		$	628
Amortization of other intangibles		1,142			961			535
Accrued expenses, deducted for tax when paid		(2,076	)		4,423			5,069
Capitalized costs for books, deducted for tax		7,448			4,693			6,809
Depreciation		(1,709	)		(951	)		(9,804	)
Federal impact of unrecognized tax benefits		331			(921	)		1,353
Foreign tax credit carryforwards		5,719			(5,719	)		5,434
Other, net		5,787			4,314			(4,272	)

	$	17,156		$	7,370		$	5,752

The deferred income tax amounts included on the Consolidated Statements of Financial Position are composed of the following (in thousands):


	December 31,
	2011			2010
Current deferred income tax assets, net	$	88,578		$	92,087
Long-term deferred income tax liabilities, net		(14,377	)		(1,379	)

	$	74,201		$	90,708

The components of the deferred income tax amounts at December 31, 2011 and 2010, were as follows (in thousands):


	December 31,
	2011			2010
Deferred Income Tax Assets
Provision for bad debts	$	7,123		$	7,299
Employee retirement and other benefit obligations		54,708			49,028
Workers' compensation		8,526			8,284
Deferred compensation		15,502			18,909
Credits and net operating loss carryforwards		42,289			47,847
Other		16,427			18,727

Total deferred income tax assets		144,575			150,094

Deferred Income Tax Liabilities
Amortization of intangible assets		(20,475	)		(18,819	)
Property and equipment basis differences		(8,823	)		(3,203	)
Other		(4,742	)		(6,381	)

Total deferred income tax liabilities		(34,040	)		(28,403	)
Valuation allowance		(36,334	)		(30,983	)

Total deferred income tax assets, net	$	74,201		$	90,708

The Company has net operating loss carryforwards in a number of states. The tax benefit of these net operating losses is $0.2 million. These state net operating losses expire in 2013 and later. The Company has net operating loss carryforwards in foreign countries. The tax benefit of these net operating losses is $34.2 million. These net operating losses expire in 2014 and later.

The Company has not provided deferred income taxes or foreign withholding taxes on $2.2 million and $2.0 million of undistributed earnings of its non-U.S. subsidiaries as of December 31, 2011 and 2010, respectively, since the Company intends to reinvest these earnings indefinitely. The U.S. tax impact upon repatriation, net of foreign tax credits, would be zero for the year ended December 31, 2011 and 2010.

FASB authoritative guidance prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The literature also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The following table reconciles the total amounts of gross unrecognized tax benefits from January 1, 2009 to December 31, 2011 (in thousands):


	December 31,
	2011			2010			2009
Balance at beginning of period	$	12,505		$	13,135		$	20,485
Gross increases—tax positions in prior years		564			910			2,152
Gross decreases—tax positions in prior years		(1,061	)		(493	)		(6,592	)
Gross increases—tax positions in current year		40			64			130
Settlements		(111	)		(1,111	)		(3,040	)
Lapse of statute of limitations		(268	)		—			—

Balance at end of period	$	11,669		$	12,505		$	13,135

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $2.7 million, $3.5 million and $3.0 million for 2011, 2010 and 2009, respectively.

The Company's continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. The total amount of interest and penalties accrued as of December 31, 2011, is $5.3 million, including a $0.3 million reduction recorded in income tax expense during the year. The total amount of interest and penalties accrued as of December 31, 2010, was $5.7 million, including a $0.4 million increase recorded in income tax expense during the year. The total amount of interest and penalties accrued as of December 31, 2009, was $5.6 million, including a $2.8 million reduction recorded in income tax expense during the year.

The Company believes it is reasonably possible that the settlement of certain tax uncertainties could occur within the next twelve months; accordingly, $4.9 million of the unrecognized gross tax benefit has been classified as a current liability as of December 31, 2011. This amount primarily represents unrecognized tax benefits composed of items related to assessed state income tax audits, as well as state, U.S. and Canadian federal settlement negotiations.

The Company's major income tax jurisdictions are the United States and Canada. For U.S. federal income tax, the Company remains subject to examination for 2002, 2003, 2008 and subsequent years. For major U.S. states, with few exceptions, the Company remains subject to examination for 2007 and subsequent years. For Canada, the Company remains subject to examination for 2002 and subsequent years.