The components of the Company's Provision for income taxes are as follows (amounts in thousands):

				Year Ended December 31,
			2011		2010		2009
Current provision
	Federal		$	(10,371)	$	9,612	$	7,751
	State			297		1,391		(317)
	Foreign			21,695		20,458		13,977
		Total current provision		11,621		31,461		21,411
Deferred provision (benefit)
	Federal			(838)		(128)		7,027
	State			(44)		(17)		460
	Foreign			2,540		(2,885)		(1,421)
		Total deferred provision (benefit)		1,658		(3,030)		6,066
		Total provision for income taxes	$	13,279	$	28,431	$	27,477

The following reconciles the Company's effective tax rate to the federal statutory rate (amounts in thousands):

				Year Ended December 31,
			2011		2010		2009
Income tax per U.S. federal statutory rate (35%)			$	32,044	$	28,689	$	36,084
	State income taxes, net of federal deduction			875		2,079		1,015
	Change in valuation allowances			(79)		5,645		(2,855)
	Foreign income taxes at different rates than the U.S.			(18,136)		(12,499)		(12,812)
	Foreign withholding taxes			2,177		989		3,402
	Increase to current/deferred tax assets due to
		implementation of tax planning strategies		-		(4,910)		-
	Losses in international markets without tax benefits			1,094		964		856
	Nondeductible compensation under Section 162(m)			2,408		1,002		1,162
	Liabilities for uncertain tax positions			1,875		(2,695)		401
	Permanent difference related to foreign exchange gains			(45)		(46)		(110)
	(Income)/losses of foreign branch operations			70		2,340		(78)
	Non-taxable earnings of minority interest			390		(603)		(434)
	Foreign dividend less foreign tax credits			(5,294)		5,344		-
	Increase in deferred tax liability - branch losses in UK			18		2,586		-
	Increase to deferred tax asset - change in state tax rate			-		(588)		-
	IRS settlement on prior year refund claims			(11,700)		-		-
	Canada CRA tax decision			8,680		-		-
	Other			(1,098)		134		846
Income tax per effective tax rate			$	13,279	$	28,431	$	27,477

The Company's deferred income tax assets and liabilities are summarized as follows (amounts in thousands):

			Year Ended December 31,
			2011		2010
Deferred tax assets, gross
	Accrued workers compensation, deferred compensation
		and employee benefits	$	4,720	$	2,337
	Allowance for doubtful accounts, insurance and other accruals			6,017		8,402
	Depreciation and amortization			8,377		12,579
	Amortization of deferred rent liabilities			1,472		2,624
	Net operating losses			15,932		19,126
	Equity compensation			7,389		7,010
	Customer acquisition and deferred revenue accruals			10,252		1,905
	Federal and state tax credits, net			15,965		18,450
	Contract acquisition costs			-		241
	Unrealized losses on derivatives			2,679		-
	Other			11,284		5,431
		Total deferred tax assets, gross		84,087		78,105
	Valuation allowances			(16,555)		(22,636)
		Total deferred tax assets, net		67,532		55,469
Deferred tax liabilities
	Long-term lease obligations			(23)		(28)
	Unrealized gains on derivatives			-		(4,810)
	Contract acquisition costs			(6,015)		-
	Future losses in UK			(4,571)		(4,554)
	Other			(5,349)		(5,157)
		Total deferred tax liabilities		(15,958)		(14,549)
		Net deferred tax assets	$	51,574	$	40,920

The Company periodically reviews the likelihood that deferred tax assets will be realized in future tax periods under the “more likely than not” criteria. In making this judgment, the Company evaluates all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is required.

As of December 31, 2011 the Company had approximately $42.2 million of net deferred tax assets in the U.S. and $25.9 million of net deferred tax assets related to certain international locations whose recoverability is dependent upon their future profitability. As of December 31, 2011 the deferred tax valuation allowance was $16.6 million and related primarily to tax losses in foreign jurisdictions and U.S. federal and state tax credits which do not meet the “more-likely-than-not” standard under current accounting guidance. The utilization of these state tax credits are subject to numerous factors including various expiration dates, generation of future taxable income over extended periods of time and state income tax apportionment factors which are subject to change.

When there is a change in judgment concerning the recovery of deferred tax assets in future periods, a valuation allowance is recorded into earnings during the quarter in which the change in judgment occurred. In 2011, the Company made adjustments to its deferred tax assets and corresponding valuation allowances. The net reduction to the valuation allowance of $6.1 million was due to a $3.7 million decrease in certain state credits and NOLs that do not meet the “more-likely-than-not” standard; a $2.4 million decrease due to the dissolution of South Africa, a $0.8 million increase in valuation allowance in Spain for deferred tax assets that do not meet the “more-likely-than-not” standard; a $1.3 million decrease in the valuation allowance related to certain federal tax credits; and a $0.5 million increase in the valuation allowance in certain other foreign jurisdictions.

On February 20, 2011, the Company received notice of an adverse decision by the Canadian Revenue Agency (“CRA”) in regards to the Company's attempt to recover taxes paid to Canada with respect to the years 2001 and 2002. In 2005, through the Competent Authority process, the Company sought relief under the United States-Canada Income Tax Convention for avoidance of double taxation arising from adjustments to the taxable income originally reported to these jurisdictions. Consistent with accounting for tax positions that no longer meet the recognition criteria, the Company derecognized income tax positions totaling $8.6 million through income tax expense in the first quarter of 2011. The Company continues to believe in the merits of its claim for which it sought relief from double taxation through the Competent Authority process. In response the Company has filed for Judicial Review in the Federal Court of Canada seeking a writ of mandamus to compel the CRA to accept the Company's application for Competent Authority consideration.

On December 20, 2011, the Company received written notice from the Internal Revenue Service that the Joint Committee on Taxation has completed its consideration of the mediated settlement reached with the IRS concerning tax refund claims and taken no exception to the conclusions reached. During 2011, the Company recognized, as a reduction to income tax expense, income tax positions (including interest net of tax) of $11.7 million related to these claims. The Company expects to collect these refunds during the first quarter of 2012.

As of December 31, 2011, after consideration of all tax loss and tax credit carry back opportunities, the Company had net tax loss carry forwards expiring as follows (amounts in thousands):

As of December 31, 2011, domestically, the Company had federal tax credit carry forwards in the amount of $6.1 million that if unused will expire in 2020 and $4.7 million that if unused will expire in 2021. The Company also had state tax credit carry-forwards of $5.2 million that if unused will expire between 2012 and 2023.

As of December 31, 2011 the cumulative amount of foreign earnings considered permanently invested outside the U.S. was $223.1 million. Those earnings do not include earnings from certain subsidiaries which the Company intends to repatriate to the U.S. or are otherwise considered available for distribution to the U.S. Accordingly, no provision for U.S. federal or state income taxes or foreign withholding taxes has been provided on these undistributed earnings. If these earnings become taxable in the U.S, the Company would be subject to incremental tax expense, after any applicable foreign tax credit, and foreign withholding tax expense. It is not practicable to estimate the additional taxes that may become payable upon the eventual remittance of these foreign earnings.

The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of the Philippines and Costa Rica. Generally, a Tax Holiday is an agreement between the Company and a foreign government under which the Company receives certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities. In the Philippines, the Company has been granted 14 separate agreements with an initial period of four years and additional periods for varying years, expiring at various times between 2011 and 2013. The aggregate effect on income tax expense for the years ended December 31, 2011, 2010 and 2009 was approximately $14.0 million, $7.6 million and $8.9 million, respectively, which had a favorable impact on diluted net income per share of $0.25, $0.13 and $0.14, respectively.

In accordance with ASC 740, the Company has recorded a reserve for uncertain tax positions. The total amount of interest and penalties recognized in the accompanying Consolidated Statements of Operations and Comprehensive Income as of December 31, 2011, 2010 and December 31, 2009 was approximately $0.1 million $0.1 million and $0.1 million, respectively, and the total amount of interest and penalties recognized in the accompanying Consolidated Balance Sheets as of December 31, 2011 and 2010 was approximately $0.6 million and $0.5 million, respectively.

The Company had a reserve for uncertain tax benefits, on a net basis, of $3.3 million and $9.0 million for the years ended December 31, 2011 and 2010, respectively. The liability for uncertain tax positions was reduced by $0.4 million for tax positions that were resolved favorably or expired. It was also reduced by $8.1 million on account of new information used in the measurement of an unrecognized tax benefit.

The tabular reconciliation of the reserve for uncertain tax benefits on a gross basis for the year ended December 31, 2011 is presented below (amounts in thousands):

Balance as of December 31, 2008		$	21,918
	Additions for current year tax positions		352
	Reductions in prior year tax positions		(238)
Balance as of December 31, 2009			22,032
	Additions for current year tax positions		28
	Reductions in prior year tax positions		(13,025)
Balance as of December 31, 2010			9,035
	Additions for current year tax positions		2,202
	Reductions in prior year tax positions		(8,502)
Balance as of December 31, 2011		$	2,735

At December 31, 2011, the amount of uncertain tax benefits that, if recognized, would reduce tax expense was $2.7 million. Within the next 12 months, it is reasonably possible that unrecognized tax benefits may decrease by $0.5 million as the result of the expiration of various statutes of limitation.

The Company and its domestic and foreign subsidiaries (including Percepta LLC and its domestic and foreign subsidiaries) file income tax returns as required in the U.S. federal jurisdiction and various state and foreign jurisdictions. The following table presents the major tax jurisdictions and tax years that are open as of December 31, 2011 and subject to examination by the respective tax authorities:

Tax Jurisdiction	Tax Year Ended
United States	2002 to 2004 and 2008 to present
Argentina	2006 to present
Australia	2006 to present
Brazil	2003 to present
Canada	2005 to present
Mexico	2006 to present
Philippines	2008 to present
Spain	2007 to present

The Company's U.S. income tax returns filed for the tax years ending December 31, 2002 through 2004, and 2008 to present, remain open tax years subject to IRS audit. The Company has been notified of the intent to audit, or is currently under audit of income taxes in the Philippines. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company's Consolidated Financial Statements.