15. Income Taxes

The provision for income taxes from continuing operations is comprised of the following:

	Year ended December 31,
	2012		2011		2010

Current	$	89,934	$	70,201	$	34,090
Deferred	45,371		23,617		34,537
Total income tax provision from continuing operations	$	135,305	$	93,818	$	68,627

The following table presents a reconciliation between the statutory federal income tax rate and the Company’s effective federal income tax rate from continuing operations for the years ended December 31, 2012, 2011 and 2010:

	Year ended December 31,
	2012		2011		2010

Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
Income tax effect of:
Investment income not subject to federal tax	(2.3	)%	(2.7	)%	(2.2	)%
Tax credits	(1.3	)%	(2.1	)%	(2.9	)%
State income taxes, net of federal benefit	1.2	%	0.7	%	0.7	%
Income tax contingency provisions	0.0	%	2.0	%	(3.9	)%
Other, net	3.6	%	(1.2	)%	(0.8	)%
Effective federal income tax rate from continuing operations	36.2	%	31.7	%	25.9	%

A reconciliation of unrecognized tax benefits for the years ended December 31, 2012, 2011 and 2010 is as follows:

	Year ended December 31,
	2012			2011			2010

Balance, beginning of year	$	32,123		$	35,256		$	81,390
Additions to tax positions in the current year	6,230			6,557			6,939
Reductions to tax positions in the current year	—			(420		)	—
Additions to tax positions in the prior year	420			4,785			142
Reductions to tax positions in the prior year	(10,219		)	(9,858		)	(47,922		)
Reductions to tax positions from statutes expiring	(2,704		)	(4,197		)	(5,253		)
Settlements	—			—			(40		)
Balance, end of year	$	25,850		$	32,123		$	35,256

Included in the unrecognized tax benefits of $25,850 at December 31, 2012 was $3,832 of tax benefits that, if recognized, would impact the annual effective tax rate.

The Company anticipates additional increases in its unrecognized tax benefits of $0 to $1,000 in the next twelve months. The Company expects that this increase in its unrecognized tax benefit will impact the effective tax rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in current income tax expense. The Company recognized approximately $208, $2,629 and $(13,403) in interest and penalties related to the uncertain tax positions during the years ended December 31, 2012, 2011 and 2010, respectively. The Company had approximately $4,412 and $4,204 accrued for the payment of interest and penalties at December 31, 2012 and 2011, respectively.

The Company files income tax returns in the U.S. federal jurisdiction and various states. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years 2007 and prior. Tax years 2008, 2009, 2010 and 2011 are open to federal examination by the I.R.S. The Company does not expect significant increases or decreases to unrecognized tax benefits relating to federal, state or local audits.

Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. The tax effect of temporary differences, which give rise to the deferred tax assets and liabilities as of December 31, 2012 and 2011, are as follows:

	December 31,
	2012				2011
	Deferred		Deferred		Deferred		Deferred
	tax asset		tax liability		tax asset		tax liability

Policyholder reserves	$	—	$	218,303	$	—	$	210,457
Deferred acquisition costs	46,832		—		35,154		—
Investment assets	—		496,096		—		336,482
Policyholder dividends	11,586		—		18,449		—
Net operating loss carryforward	180,448		—		200,486		—
Pension plan accrued benefit liability	98,981		—		72,387		—
Goodwill	—		24,045		—		25,169
Experience rated refunds	10,908		—		21,623		—
Tax credits	106,552		—		74,389		—
Other	—		5,858		—		4,843
Total deferred taxes	$	455,307	$	744,302	$	422,488	$	576,951

Amounts presented for investment assets above include $(410,044) and $(264,078) related to the net unrealized losses (gains) on the Company’s investments, which are classified as available-for-sale at December 31, 2012 and 2011, respectively.

The Company, together with certain of its subsidiaries, and Lifeco U.S. have entered into an income tax allocation agreement whereby Lifeco U.S. files a consolidated federal income tax return. Under the agreement, these companies are responsible for and will receive the benefits of any income tax liability or benefit computed on a separate tax return basis.

The Company has federal net operating loss carry forwards generated by a subsidiary that is included in the Lifeco U.S. consolidated federal income tax return. As of December 31, 2012, the subsidiary had net operating loss carry forwards expiring as follows:

Year	Amount

2020	$	119,978
2021	113,002
2022	136,796
2023	81,693
Total	$	451,469

During 2012 and 2011, the Company generated $30,965 and $34,020 of Guaranteed Federal Low Income Housing tax credit carryforwards respectively. As of December 31, 2012, the total credit carryforward for Low Income Housing is $100,670. These credits will begin to expire in 2030.

Included in due from parent and affiliates at December 31, 2012 and 2011 is $4,353 and $115,300, respectively, of income taxes receivable from Lifeco U.S. related to the consolidated income tax return filed by the Company and certain subsidiaries. Included in the consolidated balance sheets at December 31, 2012 and 2011 is $12,585 and $9,019, respectively, of income taxes receivable in other assets primarily related to the separate state income tax returns filed by certain subsidiaries.