Income Taxes

Income before income taxes from continuing operations is as follows for years ended December 31, 2012, 2011 and 2010:



	2012			2011			2010
	Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates	Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates	Continuing Operations Attributable to CoreLogic	Equity In Earnings of Affiliates
United States	169,996		56,928	91,168		49,180	29,702	69,383
Foreign	(2,075	)	1,153	(1,748	)	315	12,812	—
Total	167,921		58,081	89,420		49,495	42,514	69,383

For the year ended December 31, 2010 income on continuing operations attributable to Corelogic includes income of certain incorporated noncontrolling interests.

Provision for Income Taxes

The provision/(benefit) for taxes consists of the following for the years ended December 31, 2012, 2011 and 2010:



(in thousands)	2012					2011					2010
	Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic			Equity In Earnings of Affiliates
Current:
Federal	$	39,683		$	18,929	$	50,105		$	16,180	$	11,297		$	22,422
State	7,823			2,846		9,464			2,951		14,431			5,320
Foreign	(3,358		)	323		13,670			94		634			—
	44,148			22,098		73,239			19,225		26,362			27,742
Deferred:
Federal	24,111			—		(1,799		)	—		11,446			—
State	2,442			—		(267		)	—		(4,576		)	—
Foreign	9,695			—		(3,998		)	—		(2,909		)	—
	36,248			—		(6,064		)	—		3,961			—
Total Income Tax Provision/(Benefit)	$	80,396		$	22,098	$	67,175		$	19,225	$	30,323		$	27,742

A reconciliation of the provision for taxes based on the federal statutory income tax rate on income from continuing operations to our effective income tax rate is as follows for years ended December 31, 2012, 2011 and 2010:



(in thousands)	2012				2011				2010
	Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates		Continuing Operations Attributable to CoreLogic		Equity In Earnings of Affiliates
Federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	5.3	%	3.2	%	6.7	%	3.9	%	15.1	%	5.0	%
Foreign taxes (less than) in excess of federal rate	3.7	%	(0.1	)%	(0.5	)%	—	%	(2.6	)%	—	%
Non-deductible expenses, including Separation-related	0.2	%	—	%	0.7	%	—	%	15.1	%	—	%
Gain on disposition of subsidiary	—	%	—	%	12.7	%	—	%	—	%	—	%
Change from investee to subsidiary	—	%	—	%	13.7	%	—	%	—	%	—	%
Change in uncertain tax positions	0.1	%	—	%	5.1	%	—	%	3.2	%	—	%
Other items, net	3.6	%	—	%	1.6	%	—	%	5.5	%	—	%
Effective Income Tax Rate	47.9	%	38.1	%	75.0	%	38.9	%	71.3	%	40.0	%

Included in our 2012 other items was a one time charge of approximately $5.6 million related to out of period adjustments primarily for periods prior to 2010 as described in Note 2 - Significant Accounting Policies.

As of December 31, 2012, we had an estimated $9.2 million of undistributed earnings from foreign subsidiaries that are intended to be indefinitely reinvested in foreign operations. No incremental United States tax has been provided for these earnings. If in the future these earnings are repatriated to the U.S., or if we determine that the earnings will be remitted in the foreseeable future, additional tax provisions may be required. It is not practicable to calculate the deferred taxes associated with those earnings because of the variability of multiple factors that would need to be assessed at the time of assumed repatriation; however foreign tax credits may be available to reduce federal income taxes in the event of distribution.

Deferred Tax Assets and Liabilities

Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the deferred income tax assets and liabilities as of December 31, 2012 and 2011 are as follows:



(in thousands)	2012			2011
Deferred tax assets:
Federal net operating loss capital loss and credit carryforwards	$	45,259		$	65,168
Deferred revenue	114,770			137,688
Bad debt reserves	8,483			7,119
Employee benefits	47,479			43,684
Accrued expenses and loss reserves	35,303			29,384
Other	9,877			2,519
Less: valuation allowance	(30,955		)	(29,389		)
	230,216			256,173
Deferred tax liabilities:
Depreciable and amortizable assets	182,283			186,260
Investment in affiliates	20,457			10,407
	202,740			196,667
Net deferred tax asset/(liability)	$	27,476		$	59,506

As of December 31, 2012 , we had available federal, state and foreign net operating losses ("NOL") of $63.2 million, $108.6 million and $25.2 million, respectively. The federal NOLs begin to expire in 2017 and the state NOLs begin to expire in 2013. Of the foreign NOLs, $13.0 million have an indefinite expiration and the remainder begin to expire in 2014. As of December 31, 2012 we had available federal capital losses of $25.8 million expiring in 2017. As of December 31, 2012 we had available state capital losses of $111.2 million expiring at various times beginning in 2015. Our change in cumulative net operating loss and credit carryforwards was primarily due to reduction of federal and state net operating losses governed by the change of ownership provisions of the Tax Reform Act of 1986 limiting utilization of a portion of our domestic NOL and tax credit carryforwards in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities. Our change in federal and state capital losses was due to the sale of ADR for which a full valuation allowance was recorded.

As of December 31, 2012 and 2011, we had valuation allowances of approximately $31.0 million and $29.4 million against certain U.S. and foreign deferred tax assets, respectively, to reflect the deferred tax asset at the net amount that is more likely than not to be realized. The valuation allowance increased by $13.1 million related to capital and net operating losses that are expected to expire unutilized, and amounts necessary for the portion of foreign deferred tax assets which we believe it is more likely than not that future taxable income will not be sufficient to realize. The valuation allowance decreased by $11.6 million to reflect reduction of related acquired net operating loss and credit carryforwards.

Unrecognized Tax Benefits

A reconciliation of the unrecognized tax benefits for years ended December 31, 2012 and 2011 is as follows:



(In thousands)	2012			2011
Unrecognized Tax Benefits - Opening Balance	$	19,302		$	22,590
Gross Increases - tax positions in prior period	33,787			19
Gross decreases - tax positions in prior period	(21		)	(8,899		)
Gross increases - current-period tax positions	—			5,727
Settlements with taxing authorities	(163		)	—
Expiration of the statute of limitations for the assessment of taxes	(251		)	(135		)
Unrecognized Tax Benefits - Ending Balance	$	52,654		$	19,302

Included in the December 31, 2012 and 2011 balances are $8.5 million and $8.9 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the effective tax rate. The remaining $44.1 million and $10.4 million respectively would be offset against FAFC receivable See Note 19 - Transactions with FAFC for further discussion.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2012 and 2011, we had $7.7 million and $5.5 million, respectively, accrued for the payment of interest and penalties. These balances are gross amounts before any tax benefits and are included in other liabilities in the consolidated balance sheets. For the years ended December 31, 2012 and 2011, we recognized approximately $0.6 million and $1.2 million in interest and penalties, respectively, in the consolidated statements of income. Our material tax jurisdiction is the United States. With a few minor exceptions, we are no longer subject to U.S. federal, state, local, or foreign income tax examinations by tax authorities for years prior to December 31, 2006. Our income tax returns in several jurisdictions are being examined by various tax authorities. Management believes that adequate amounts of tax and related interest and penalties, if any, have been provided for any adjustments that may result from these examinations.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions could significantly increase or decrease within the next 12 months. We estimate that decreases in unrecognized tax benefits within the next 12 months will total approximately $0.6 million.