INCOME TAXES

Our provisions for income taxes and our cash taxes paid are as follows:



	Year Ended December 31,
(in thousands)	2012			2011			2010
Current:
Domestic	$	4,039		$	13,169		$	18,982
Foreign	108,212			81,556			54,525
Total current	112,251			94,725			73,507
Deferred:
Domestic	26,170			12,144			20,529
Foreign	(5,516		)	(4,642		)	10,655
Total deferred	20,654			7,502			31,184
Total provision for income taxes	$	132,905		$	102,227		$	104,691
Cash taxes paid	$	92,422		$	72,825		$	121,440

The components of income before income taxes are as follows:



	Year Ended December 31,
(in thousands)	2012		2011		2010
Domestic	$	53,240	$	41,831	$	87,776
Foreign	368,682		296,054		217,446
Income before income taxes	$	421,922	$	337,885	$	305,222

As of December 31, 2012 and 2011, our worldwide deferred tax assets, liabilities and net deferred tax liabilities were as follows:



	December 31,
(in thousands)	2012		2011
Deferred tax assets:
Deferred compensation	$	42,296	$	26,923
Deferred income	10,251		11,588
Accrued expenses	7,676		8,647
Other	12,613		4,875
Gross deferred tax assets	72,836		52,033
Valuation allowance	—		—
Total deferred tax assets	$	72,836	$	52,033
Deferred tax liabilities:
Property and equipment	$	106,237	$	88,657
Unremitted foreign earnings	91,164		58,195
Basis difference in equity investments	13,860		15,518
Other	17,071		26,477
Total deferred tax liabilities	$	228,332	$	188,847
Net deferred income tax liability	$	155,496	$	136,814

Our net deferred tax liability is reflected within our balance sheet as follows:



	December 31,
(in thousands)	2012			2011
Deferred tax liabilities	$	178,100		$	157,532
Current deferred tax assets	(22,604		)	(20,718		)
Net deferred income tax liability	$	155,496		$	136,814

At December 31, 2012 we have approximately $4.4 million of foreign tax credits available to reduce future payments of U.S. federal income taxes. These tax credits expire commencing in 2021. We believe it is more likely than not that all our deferred tax assets are realizable. Reconciliations between the actual provision for income taxes on continuing operations and that computed by applying the United States statutory rate to income before income taxes were as follows:



	Year Ended December 31,
	2012		2011		2010
United States statutory rate	35.0	%	35.0	%	35.0	%
State and local taxes	0.1		0.2		0.3
Foreign tax rate differential	(2.9	)	(3.3	)	—
Amended returns filed	—		(1.4	)	—
Other items, net	(0.7	)	(0.2	)	(1.0	)
Total effective tax rate	31.5	%	30.3	%	34.3	%

We consider $251 million of unremitted earnings of our foreign subsidiaries to be indefinitely reinvested. It is not practical for us to compute the amount of additional U.S. tax that would be due on this amount. We have provided deferred income taxes on the foreign earnings we expect to repatriate.

We recognize the benefit for a tax position if the benefit is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50% likely of being realized upon ultimate settlement.

We account for any applicable interest and penalties on uncertain tax positions as a component of our provision for income taxes on our financial statements. We increased/(decreased) income tax expense by $(2.7) million, $0.4 million and

$0.2 million in 2012, 2011 and 2010, respectively, for penalties and interest on uncertain tax positions, which brought our total liabilities for penalties and interest on uncertain tax positions to $1.7 million and $4.4 million on our balance sheets at December 31, 2012 and 2011, respectively. Including associated foreign tax credits and penalties and interest, we have accrued a net total of $6.5 million in the caption "other long-term liabilities" on our balance sheet for unrecognized tax benefits at December 31, 2012. All additions or reductions to those liabilities affect our effective income tax rate in the periods of change.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, not including associated foreign tax credits and penalties and interest, is as follows:



	Year Ended December 31,
(in thousands)	2012			2011			2010
Beginning of year	$	10,104		$	9,991		$	9,488
Additions based on tax positions related to the current year	244			947			1,296
Reductions for expiration of statutes of limitations	(225		)	(834		)	(793		)
Additions based on tax positions related to prior years	3,335			—			—
Reductions based on tax positions related to prior years	(8,193		)	—			—
Settlements	(125		)	—			—
Balance at end of year	$	5,140		$	10,104		$	9,991

We do not believe that the total of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

We file a consolidated U.S. federal income tax return for Oceaneering International, Inc. and our domestic subsidiaries. We conduct our international operations in a number of locations that have varying laws and regulations with regard to income and other taxes, some of which are subject to interpretation. Our management believes that adequate provisions have been made for all taxes that will ultimately be payable, although final determination of tax liabilities may differ from our estimates.

Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years to complete and settle. The following lists the earliest tax years open to examination by tax authorities where we have significant operations:



Jurisdiction		Periods
United States		2009
United Kingdom		2009
Norway		2002
Angola		2007
Nigeria		2006
Brazil		2007
Australia		2009
Canada		2009