INCOME TAXES:

The components of income from continuing operations before taxes for the years ended December 31, 2011, 2010 and 2009 were as follows (dollars in thousands):



	2011		2010		2009
United States	$	98,050	$	89,132	$	65,041
Foreign	59,974		19,701		10,950
Total	$	158,024	$	108,833	$	75,991

The Company files a consolidated United States federal income tax return that includes all of its United States subsidiaries. Each of the Company’s foreign subsidiaries files appropriate income tax returns in its respective country. No provision is made for the United States income taxes applicable to the undistributed earnings of controlled foreign subsidiaries as it is the intention of management to fully utilize those earnings in the operations of foreign subsidiaries. If the earnings were to be distributed in the future, those distributions may be subject to United States income taxes (appropriately reduced by available foreign tax credits) and withholding taxes payable to various foreign countries, however, the amount of the tax and credits is not practically determinable. The amount of undistributed earnings of the Company’s controlled foreign subsidiaries as of December 31, 2011 was $155.4 million.

The components of the provision for income taxes on continuing operations for the years ended December 31, 2011, 2010 and 2009 were as follows (dollars in thousands):



	2011		2010			2009
United States:
Current
Federal	$	5,652	$	5,105		$	2,526
State	3,686		2,728			2,724
Deferred
Federal	12,578		14,037			6,764
State	1,535		2,759			2,077
	23,451		24,629			14,091
Foreign:
Current	6,488		8,967			3,947
Deferred	8,592		(3,432		)	(2,122		)
	15,080		5,535			1,825
Total	$	38,531	$	30,164		$	15,916

The provision for income taxes differs from that which would be computed by applying the statutory United States federal income tax rate to income before taxes. The following is a summary of the effective tax rate reconciliation for the years ended December 31, 2011, 2010 and 2009:



	2011		2010		2009
Tax provision at statutory rate	35.0	%	35.0	%	35.0	%
Effect of acquisitions/divestitures	(3.1	)%	—	%	—	%
Effect of foreign operations	(2.9	)%	(1.2	)%	(2.6	)%
State income taxes, net of federal income tax benefit	2.3	%	3.1	%	4.2	%
Benefit of track maintenance credit	(6.5	)%	(9.3	)%	(15.0	)%
Other, net	(0.4	)%	0.1	%	(0.7	)%
Effective income tax rate	24.4	%	27.7	%	20.9	%

The United States track maintenance credit is an income tax credit for Class II and Class III railroads to reduce their federal income tax based on qualified railroad track maintenance expenditures (the Short Line Tax Credit). Qualified expenditures include amounts incurred for maintaining track, including roadbed, bridges and related track structures owned or leased by a Class II or Class III railroad. The credit is equal to 50% of the qualified expenditures, subject to an annual limitation of $3,500 multiplied by the number of miles of railroad track owned or leased by the Class II or Class III railroad as of the end of their tax year. The Short Line Tax Credit has been in existence since 2005. The Short Line Tax Credit expired on December 31, 2011.

Deferred income taxes reflect the effect of temporary differences between the book and tax basis of assets and liabilities as well as available income tax credit and capital and net operating loss carryforwards. The components of net deferred income taxes as of December 31, 2011 and 2010 were as follows (dollars in thousands):



	2011			2010
Deferred tax assets:
Accruals and reserves not deducted for tax purposes until paid	$	4,290		$	6,845
Net operating loss carryforwards	1,306			1,262
Capital loss carryforward	5,251			6,367
Interest rate swaps	2,547			3,306
Nonshareholder contributions	1,622			1,998
Deferred compensation	2,473			1,963
Postretirement benefits	801			745
Share-based compensation	4,358			4,421
Foreign tax credit	1,964			1,964
Track maintenance credit	38,238			37,639
Other	87			494
	62,937			67,004
Valuation allowance	(5,251		)	(6,367		)
Deferred tax liabilities:
Property basis difference	(321,365		)	(297,476		)
Other	(1,299		)	(2,125		)
Net deferred tax liabilities	$	(264,978	)	$	(238,964	)

In the accompanying consolidated balance sheets, these deferred benefits and deferred obligations are classified as current or non-current based on the classification of the related asset or liability for financial reporting. A deferred tax obligation or benefit that is not related to an asset or liability for financial reporting, including deferred tax assets related to tax credit and loss carryforwards, are classified according to the expected reversal date of the temporary difference as of the end of the year.

The Company utilized $5.4 million and $1.6 million of state net operating loss carryforwards from its United States operations during the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, the Company had United States net operating loss carryforwards in various state jurisdictions that totaled approximately $28.8 million. It is anticipated that the Company will be able to fully utilize these remaining losses prior to expiration. These state net operating losses exist in different states and expire between 2020 and 2028.

As of December 31, 2011, the Company had United States capital loss carryforwards of $15.0 million, which were reflected as deferred tax assets of $5.3 million at currently estimated rates. These losses will expire in 2012. Based on the Company’s assessment that it is more likely than not these losses will not be realized, these capital loss carryforwards are offset by a full valuation allowance.

As of December 31, 2011 and 2010, the Company had track maintenance credit carryforwards of $38.2 million and $37.6 million, respectively. These tax credit carryforwards will expire between 2025 and 2032.

In the year ended December 31, 2011, the Company recorded a reduction to its valuation allowance of $1.1 million associated with the utilization of deferred tax assets related to United States capital loss carryforwards, which were previously subject to a valuation allowance.

In the year ended December 31, 2010, the Company recorded a reduction to its valuation allowance of $3.2 million associated with the utilization of deferred tax assets related to United States capital loss carryforwards and a reduction in a deferred tax asset in Australia, which were previously subject to a valuation allowance.

In the year ended December 31, 2009, the Company recorded a valuation allowance of $0.2 million against a capital loss carryforward of $0.5 million which resulted from the sale of its interest in Bolivia. Also in 2009, the Company recorded a reduction of $0.8 million in the valuation allowance associated with deferred tax assets primarily related to Canadian losses recorded in prior years. The reduction was based on the Company’s identification of a tax planning strategy that it considered in connection with its ongoing assessment of the realizability of future benefits.

A reconciliation of the beginning and ending amount of the Company’s liability for uncertain tax positions is as follows (dollars in thousands):



	2011		2010			2009
Balance at beginning of year	$	—	$	146		$	2,921
Increase for tax positions related to prior years	—		—			—
Increase for tax positions related to the current year	—		—			—
Settlements and lapse of statutes of limitations	—		(146		)	(2,745		)
Reductions for tax positions of prior years	—		—			(30		)
Balance at end of year	$	—	$	—		$	146

The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes.

As of December 31, 2011, the following tax years remain open to examination by the major taxing jurisdictions to which the Company is subject:



	Open Tax Years
Jurisdiction	From		To
United States	2008	-	2011
Australia	2009	-	2011
Canada	2007	-	2011
Mexico	2006	-	2011
Netherlands	2008	-	2011