Income Taxes

Significant components of the provision for income taxes including those related to noncontrolling interest and discontinued operations are as follows:



(In thousands)	2012			2011			2010
Current:
Federal	$	19,132		$	8,931		$	5,530
State	2,460			1,929			2,176
Foreign	1,175			1,719			569
Current provision	22,767			12,579			8,275
Deferred:
Federal	6,692			10,829			7,027
State	603			1,307			(331		)
Foreign	(784		)	(304		)	(84		)
Deferred provision	6,511			11,832			6,612
	$	29,278		$	24,411		$	14,887

The differences between the actual tax expense (benefit) and tax expense (benefit) computed at the statutory U.S. Federal tax rate are explained as follows:



	2012			2011			2010
Federal statutory tax expense (benefit)	$	27,386		$	24,639		$	14,640
State taxes, net of federal tax effect	2,164			2,096			1,199
Credit for increasing research activities	—			(942		)	(839		)
Deduction related to domestic production activities	(1,192		)	(1,005		)	(874		)
Foreign income tax differential	(899		)	(629		)	(666		)
Executive compensation limitation	1,672			40			—
Valuation allowance	—			2			1,149
Uncertain tax positions	611			654			558
Other tax credits	—			(203		)	—
Other – net	(464		)	(241		)	(280		)
Total income tax expense (benefit)	$	29,278		$	24,411		$	14,887

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Corporation’s deferred tax liabilities and assets are as follows:



(In thousands)	2012			2011			2010
Net long-term deferred tax liabilities:
Compensation	5,399			4,367			4,324
Stock-based compensation	7,069			5,582			4,086
Accrued post-retirement benefit obligations	5,918			5,749			5,459
OCI tax effected items	2,585			2,159			1,394
Other – net	435			3,501			2,862
Total long-term deferred tax assets	21,406			21,358			18,125
Goodwill	(63,200		)	(56,878		)	(47,186		)
Tax over book depreciation	$	(12,720	)	$	(6,300	)	$	(450	)
Total long-term deferred tax liabilities	(75,920		)	(63,178		)	(47,636		)
Valuation allowance	(919		)	(950		)	(1,014		)
Total net long-term deferred tax liabilities	(55,433		)	(42,770		)	(30,525		)
Net current deferred tax assets:
Allowance for doubtful accounts	1,233			1,691			1,987
Vacation accrual	3,920			3,078			2,938
Inventory differences	3,660			3,676			3,730
Marketing accrual	1,348			1,323			1,653
Warranty accrual	4,587			4,748			4,861
Compensation	5,609			5,532			1,758
Other – net	7,042			4,300			6,213
Total current deferred tax assets	27,399			24,348			23,140
Deferred income	(3,949		)	(3,933		)	(3,040		)
Prepaids	(812		)	(952		)	(1,017		)
Total current deferred tax liabilities	(4,761		)	(4,885		)	(4,057		)
Valuation allowance	(661		)	(666		)	(616		)
Total net current deferred tax assets	21,977			18,797			18,467
Net deferred tax (liabilities) assets	$	(33,456	)	$	(23,973	)	$	(12,058	)

At December 29, 2012, the Corporation has approximately $36.8 million of U.S. state tax net operating losses and $3.3 million of U.S. state tax credits which expire over the next twenty years.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



(in thousands)	2012			2011			2010
Unrecognized tax benefits, beginning of period	$	3,098		$	3,193		$	3,446
Increases (decreases) in positions taken in a prior period	14			492			78
Decreases in positions taken in a prior period	(8		)	(16		)	(73		)
Increases in positions taken in a current period	626			670			571
Decrease due to settlements	—			—			—
Decrease due to lapse of statute of limitations	(803		)	(1,241		)	(829		)
Unrecognized tax benefits, end of period	$	2,927		$	3,098		$	3,193

The amount of unrecognized tax benefits which would impact the Corporation’s effective tax rate, if recognized, was $2.9 million at December 29, 2012, $3.0 million at December 31, 2011 and $2.9 million at January 1, 2011.

The Corporation recognized interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses consistent with the recognition of these items in prior reporting. Interest and penalties recognized in the Consolidated Statements of Income amounted to a benefit of $30,600. The Corporation had recorded a liability for interest and penalties related to unrecognized tax benefits of $0.3 million, $0.3 million and $0.4 million as of December 29, 2012, December 31, 2011, and January 1, 2011, respectively.

Tax years 2009 through 2012 remain open for examination by the Internal Revenue Service ("IRS"). The Corporation is currently under examination in various state jurisdictions, of which years 2007 through 2012 remain open to examination.

As of December 29, 2012, it is reasonably possible the amount of unrecognized tax benefits may increase or decrease within the twelve months following the reporting date. These increases or decreases in the unrecognized tax benefits would be due to new positions that may be taken on income tax returns, settlement of tax positions and the closing of statutes of limitation. It is not expected any of the changes will be material individually or in total to the results or financial position of the Corporation.

Deferred income taxes are provided to reflect differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The Corporation provides for taxes that may be payable if undistributed earnings of overseas subsidiaries were to be remitted to the United States, except for those earnings it considers to be permanently reinvested. There were approximately $25.3 million of accumulated earnings considered permanently reinvested in China, Hong Kong and India as of December 29, 2012.