(7) Taxes on Income

Earnings before taxes on income and details of the provision for taxes on income for the years ended December 31, 2012, 2011 and 2010 were as follows (in thousands):

	2012		2011		2010
Earnings before taxes on income — United States	$	340,526	$	294,747	$	189,640

Provision for taxes on income:
Federal:
Current	$	41,297	$	33,640	$	33,014
Deferred		71,767		65,451		30,643
State and local		14,843		10,164		8,601
	$	127,907	$	109,255	$	72,258

During the three years ended December 31, 2012, 2011 and 2010, tax benefits related to the exercise of stock options and the issuance of restricted stock that were allocated directly to additional paid-in capital were $3,212,000, $1,348,000 and $373,000, respectively.

The Company's provision for taxes on income varied from the statutory federal income tax rate for the years ended December 31, 2012, 2011 and 2010 due to the following:

	2012			2011			2010
United States income tax statutory rate		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal benefit		2.8			2.2			2.9
Other – net		(.2	)		(.1	)		.2
		37.6	%		37.1	%		38.1	%

The tax effects of temporary differences that give rise to significant portions of the current deferred tax assets and non-current deferred tax assets and liabilities at December 31, 2012 and 2011 were as follows (in thousands):

	2012			2011
Current deferred tax assets:
Compensated absences	$	750		$	695
Allowance for doubtful accounts		1,652			1,752
Insurance accruals		3,306			4,150
Other		6,588			7,589
	$	12,296		$	14,186

Non-current deferred tax assets and liabilities:
Deferred tax assets:
Postretirement health care benefits	$	3,215		$	3,422
Insurance accruals		1,556			1,420
Deferred compensation		8,449			8,290
Unrealized loss on derivative financial instruments		563			3,384
Unrealized loss on defined benefit plans		33,942			28,114
Operating loss carryforwards		601			1,305
Other		13,443			9,047
		61,769			54,982

Deferred tax liabilities:
Property		(408,905	)		(298,335	)
Deferred state taxes		(39,072	)		(25,738	)
Pension benefits		(18,794	)		(15,376	)
Goodwill and other intangibles		(20,220	)		(6,563	)
Other		(874	)		(1,325	)

		(487,865	)		(347,337	)
	$	(426,096	)	$	(292,355	)

The Company has determined that it is more likely than not that all deferred tax assets at December 31, 2012 will be realized, including its operating loss carryforwards of $601,000 that expire in various amounts through 2030.

The Company or one of its subsidiaries files income tax returns in the United States federal jurisdiction and various state jurisdictions. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the 2009 through 2011 tax years. With few exceptions, the Company and its subsidiaries' state income tax returns are open to audit under the statute of limitations for the 2006 through 2011 tax years.

As of December 31, 2012, the Company has provided a liability of $1,835,000 for unrecognized tax benefits related to various income tax issues which includes interest and penalties. The amount that would impact the Company's effective tax rate, if recognized, is $1,309,000, with the difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate being primarily related to the federal tax benefit of state income tax items. It is not reasonably possible to determine if the liability for unrecognized tax benefits will significantly change prior to December 31, 2013 due to the uncertainty of possible examination results.

A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits for the years ended December 31, 2012, 2011 and 2010, is as follows (in thousands):

	2012			2011			2010
Balance at beginning of year	$	1,532		$	2,088		$	2,290
Additions based on tax positions related to the current year		165			602			279
Additions for tax positions of prior years		53			402			84
Reductions for tax positions of prior years		(502	)		(738	)		(443	)
Settlements		(203	)		(822	)		(122	)
Balance at end of year	$	1,045		$	1,532		$	2,088

The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. The Company recognized net expense (credit) of $(43,000), $16,000 and $43,000 in interest and penalties for the years ended December 31, 2012, 2011 and 2010, respectively. The Company had $790,000, $977,000 and $933,000 of accrued liabilities for the payment of interest and penalties at December 31, 2012, 2011 and 2010, respectively.