INCOME TAXES

The domestic and foreign components of income before provision for income taxes were as follows:



	2012		2011		2010
Domestic	$	229,080	$	127,393	$	27,803
Foreign	314,032		235,692		48,405
Total	$	543,112	$	363,085	$	76,208

Taxes paid were $55,502, $71,873 and $40,169 in 2012, 2011 and 2010.

The provision (benefit) for income taxes attributable to income consisted of the following:



	2012		2011			2010
Federal:
Current	$	33,277	$	36,552		$	19,790
Deferred	35,766		17,880			(11,295		)
State and local:
Current	4,716		9,128			2,759
Deferred	6,305		(2,802		)	496
Foreign:
Current	21,292		26,825			12,712
Deferred	7,916		(195		)	(2,631		)
Total	$	109,272	$	87,388		$	21,831

The Company’s provision for income taxes for the years 2012, 2011 and 2010 was different from the amount computed by applying the statutory United States federal income tax rates to the underlying income as follows:



	2012		2011		2010
Statutory federal tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal income tax benefit	1.2	%	0.8	%	6.5	%
Effects of international jurisdictions, including foreign tax credits	(14.3	)%	(10.9	)%	(27.4	)%
Nondeductible short-lived intangible asset and inventory valuation amortization	—	%	—	%	24.6	%
Nondeductible professional fees in connection with acquisitions	1.0	%	—	%	3.4	%
Unrecognized tax benefits	0.7	%	(0.3	)%	(4.2	)%
Previously unrecognized tax credits	(1.0	)%	—	%	—	%
Decreases in international income tax rates	—	%	(1.4	)%	(6.9	)%
Change in valuation allowance	(1.6	)%	(1.6	)%	3.4	%
Other, net	(0.9	)%	2.5	%	(5.8	)%
Effective tax rate	20.1	%	24.1	%	28.6	%

Effects of international jurisdictions, including foreign tax credits, reflected in the above table for 2012, 2011 and 2010 include not only those taxes at statutory income tax rates but also taxes at special rates levied on income from certain jurisdictional activities. The Company expects to benefit from these special rates until 2022.

The components of deferred income tax assets and liabilities were as follows:



	2012			2011
Gross deferred tax assets
Tax loss and credit carryforwards	$	95,665		$	93,311
Employee compensation and benefits	102,105			116,448
Inventories	13,765			19,606
Accounts receivable	12,751			14,820
Accrued expenses	22,844			18,239
Other, net	8,022			19,836
Subtotal	255,152			282,260
Valuation allowances	(9,945		)	(18,932		)
Total gross deferred tax assets, net of valuation allowances	$	245,207		$	263,328
Gross deferred tax liabilities
Intangibles	$	(712,496	)	$	(701,391	)
Property, plant and equipment	(22,732		)	(3,326		)
Total gross deferred tax liabilities	$	(735,228	)	$	(704,717	)
Net deferred tax liability	$	(490,021	)	$	(441,389	)

At the end of 2012, the Company had domestic net operating loss carryforwards of approximately $2,123, tax effected state tax loss carryforwards of approximately $12,461, which at current apportionment percentages would equate to approximately $366,299 of income (which is subject to change based upon future apportionment percentages), foreign net operating loss carryforwards of $237,985 and federal, state and local credit carryforwards of $31,187. The carryforwards expire principally between 2013 and 2032. The valuation allowance decrease relates primarily to tax attributes (e.g., state, local and foreign net operating loss carryforwards) for which the Company currently believes it is more likely than not that a portion of these losses will be realized.

The Company does not provide for deferred taxes on the excess of financial reporting over tax basis on its investments in all of its foreign subsidiaries that are essentially permanent in duration. The earnings that are permanently reinvested were $376,757 as of February 3, 2013. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation.

Unrecognized tax benefit activity for each of the last two years was as follows:



	2012			2011
Balance at beginning of year	$	184,004		$	178,634
Increases related to prior year tax positions	3,775			1,502
Decreases related to prior year tax positions	(2,747		)	(758		)
Increases related to current year tax positions	22,114			18,164
Lapses in statute of limitations	(10,939		)	(11,896		)
Effects of foreign currency translation	1,757			(1,642		)
Balance at end of year	$	197,964		$	184,004

The entire amount of unrecognized tax benefits as of February 3, 2013, if recognized, would reduce the future effective tax rate under current accounting provisions.

Interest and penalties related to unrecognized tax benefits are recorded in the Company’s income tax provision. Interest and penalties recognized in the Company’s Consolidated Income Statements totaled an expense of $3,420 and $2,969 for 2012 and 2011, respectively. Interest and penalties accrued in the Company’s Consolidated Balance Sheets as of February 3, 2013 and January 29, 2012 totaled $13,997 and $10,577, respectively. The Company records its liabilities for unrecognized tax benefits principally in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets based on the anticipated timing of relieving such liabilities.

The Company files income tax returns in the United States and in various foreign, state and local jurisdictions. With few exceptions, examinations have been completed by tax authorities or the statute of limitations has expired for United States federal, foreign, state and local income tax returns filed by the Company for years through 2007. It is reasonably possible that a reduction of uncertain tax positions in a range of $11,000 to $30,000 may occur within 12 months of February 3, 2013.