Note H—Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2012, 2011 and 2010, consisted of the following (in thousands):


	Years Ended December 31,
	2012			2011		2010
Current:
Federal	$	99,354		$	48,068	$	18,085
State		24,339			11,969		7,412
Foreign		25,603			23,101		16,232
Deferred:
Federal and state		(15,188	)		15,117		3,654
Foreign		195			2,039		3,716

	$	134,303		$	100,294	$	49,099

Income before the provision for income taxes for the years ended December 31, 2012, 2011 and 2010, consisted of the following (in thousands):


	Years Ended December 31,
	2012		2011		2010
Domestic	$	286,537	$	202,210	$	88,065
Foreign		57,708		48,006		27,103

	$	344,245	$	250,216	$	115,168

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


	Years Ended December 31,
	2012			2011			2010
Federal U.S. income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		4.0			3.4			2.0
Non-deductible expenses		0.8			1.3			2.7
Non-U.S. income taxed at different rates, net of foreign tax credits		0.7			2.2			3.4
Federal tax credits		(0.3	)		(1.2	)		(1.3	)
Tax impact of uncertain tax positions		(1.2	)		(0.4	)		0.2
Other, net		—			(0.2	)		0.6

Effective tax rate		39.0	%		40.1	%		42.6	%

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


	Years Ended December 31,
	2012			2011			2010
Amortization of franchise rights	$	514		$	514		$	570
Amortization of other intangibles		1,180			1,142			961
Accrued expenses, deducted for tax when paid		(13,494	)		(2,076	)		4,423
Capitalized costs for books, deducted for tax		7,395			7,448			4,693
Depreciation		(7,813	)		(1,709	)		(951	)
Federal impact of unrecognized tax benefits		478			331			(921	)
Foreign tax credit carryforwards		—			5,719			(5,719	)
Other, net		(3,253	)		5,787			4,314

	$	(14,993	)	$	17,156		$	7,370

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


	December 31,
	2012			2011
Current deferred income tax assets, net	$	102,993		$	88,578
Long-term deferred income tax liabilities, net		(14,244	)		(14,377	)

	$	88,749		$	74,201

The components of the deferred income tax amounts at December 31, 2012 and 2011, were as follows (in thousands):


	December 31,
	2012			2011
Deferred Income Tax Assets
Provision for bad debts	$	7,585		$	7,123
Employee retirement and other benefit obligations		62,637			54,708
Workers’ compensation		10,007			8,526
Deferred compensation		10,895			15,502
Credits and net operating loss carryforwards		48,609			42,289
Other		23,781			16,427

Total deferred income tax assets		163,514			144,575

Deferred Income Tax Liabilities
Amortization of intangible assets		(22,169	)		(20,475	)
Property and equipment basis differences		(8,029	)		(8,823	)
Other		(5,257	)		(4,742	)

Total deferred income tax liabilities		(35,455	)		(34,040	)
Valuation allowance		(39,310	)		(36,334	)

Total deferred income tax assets, net	$	88,749		$	74,201

The Company has net operating loss carryforwards in foreign countries. The tax benefit of these net operating losses is $37.7 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 of undistributed earnings of its non-U.S. subsidiaries as of December 31, 2012 and 2011, 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, 2012 and 2011.

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, 2010 to December 31, 2012 (in thousands):


	December 31,
	2012			2011			2010
Balance at beginning of period	$	11,669		$	12,505		$	13,135
Gross increases—tax positions in prior years		352			564			910
Gross decreases—tax positions in prior years		(273	)		(1,061	)		(493	)
Gross increases—tax positions in current year		42			40			64
Settlements		(252	)		(111	)		(1,111	)
Lapse of statute of limitations		(4,441	)		(268	)		—

Balance at end of period	$	7,097		$	11,669		$	12,505

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $1.0 million, $2.7 million and $3.5 million for 2012, 2011 and 2010, 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, 2012, is $3.1 million, including a $2.3 million reduction recorded in income tax expense during the year. The total amount of interest and penalties accrued as of December 31, 2011, was $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 Company believes it is reasonably possible that the settlement of certain tax uncertainties could occur within the next twelve months; accordingly, $2.0 million of the unrecognized gross tax benefit has been classified as a current liability as of December 31, 2012. This amount primarily represents unrecognized tax benefits composed of items related to assessed state income tax audits and negotiations.

The Company’s major income tax jurisdictions are the United States, Australia, Belgium, Canada and Germany. For U.S. federal income tax, the Company remains subject to examination for 2009 and subsequent years. For major U.S. states, with few exceptions, the Company remains subject to examination for 2008 and subsequent years. Generally, for the foreign countries, the Company remains subject to examination for 2005 and subsequent years.