Note 15 — Income Taxes

The provision for income taxes from continuing operations for the years ended September 30 consisted of:


	2012			2011			2010
Current:
Federal	$	164,302		$	168,226		$	290,071
State and local, including Puerto Rico		9,710			21,441			21,979
Foreign		241,055			210,720			155,808

	$	415,067		$	400,387		$	467,858

Deferred:
Domestic	$	(29,279	)	$	(15,483	)	$	(32,648	)
Foreign		(22,908	)		32,100			16,687

		(52,187	)		16,617			(15,961	)

	$	362,880		$	417,004		$	451,897

The components of Income From Continuing Operations Before Income Taxes for the years ended September 30 consisted of:


	2012		2011		2010
Domestic, including Puerto Rico	$	604,760	$	843,068	$	838,667
Foreign		867,648		774,819		728,074

	$	1,472,408	$	1,617,887	$	1,566,741

Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. At September 30, 2012 and 2011, net current deferred tax assets of $253,577 and $287,143, respectively, were included in Prepaid expenses, deferred taxes and other. Net non-current deferred tax assets of $137,294 and $111,786, respectively, were included in Other. Net current deferred tax liabilities of $3,882 and $7,522, respectively, were included in Current Liabilities — Income taxes. Net non-current deferred tax liabilities of $72,330 and $58,553, respectively, were included in Deferred Income Taxes and Other. Deferred taxes are not provided on undistributed earnings of foreign subsidiaries that are indefinitely reinvested. At September 30, 2012, the cumulative amount of such undistributed earnings indefinitely reinvested outside the United States was $4.4 billion. Determining the tax liability that would arise if these earnings were remitted is not practicable. Deferred taxes are provided for earnings outside the United States when those earnings are not considered indefinitely reinvested.

The following table summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled:


	2012			2011			2010
Balance at October 1	$	135,494		$	90,064		$	50,547
Increase due to current year tax positions		36,723			37,792			27,662
Increase due to prior year tax positions		4,114			12,349			25,837
Decreases due to prior year tax positions		(3,423	)		(1,815	)		(11,509	)
Decrease due to settlements and lapse of statute of limitations		(17,465	)		(2,896	)		(2,473	)

Balance at September 30	$	155,443		$	135,494		$	90,064

The total amount of unrecognized tax benefits, if recognized, would favorably impact the effective tax rate. Included in the above total is approximately $9,821 of interest and penalties, of which approximately $844 are reflected in the current year statement of operations. The Company includes interest and penalties associated with unrecognized tax benefits as a component of the Income tax provision on the Consolidated Statements of Income. The Company expects changes in the aggregate amount of unrecognized tax benefits that may occur within the next twelve months to be similar to the changes that occurred in the prior twelve months.

The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of tax jurisdictions. The IRS has completed its audit for the tax years through 2008. For the Company’s other major tax jurisdictions where it conducts business, the Company’s tax years are generally open after 2006.

Deferred income taxes at September 30 consisted of:


	2012					2011
	Assets			Liabilities		Assets			Liabilities
Compensation and benefits	$	606,370		$	—	$	590,311		$	—
Property and equipment		—			435,334		—			433,163
Loss and credit carryforwards		181,107			—		85,731			—
Other		339,751			218,559		360,893			218,571

		1,127,228			653,893		1,036,935			651,734
Valuation allowance		(158,676	)		—		(52,347	)		—

	$	968,552		$	653,893	$	984,588		$	651,734

Valuation allowances have been established as a result of an evaluation of the uncertainty associated with the realization of certain deferred tax assets. The change in the valuation allowance for 2012 is primarily the result of foreign losses due to the Company’s global re-organization of its foreign entities and these generally have no expiration date. Valuation allowances are also maintained with respect to deferred tax assets for certain federal and state carryforwards that may not be realized and that principally expire between 2013 and 2014.

A reconciliation of the federal statutory tax rate to the Company’s effective tax rate was as follows:


	2012			2011			2010
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		0.2			1.2			1.0
Effect of foreign and Puerto Rico earnings and foreign tax credits		(8.2	)		(7.5	)		(5.6	)
Effect of Research Credits and Domestic Production Activities,		(1.7	)		(2.7	)		(1.7	)
Other, net		(0.7	)		(0.2	)		0.1

		24.6	%		25.8	%		28.8	%

The approximate amounts of tax reductions related to tax holidays in various countries in which the Company does business were $83,240, $60,275 and $51,300, in 2012, 2011 and 2010, respectively. The tax holidays expire at various dates through 2026.

The Company made income tax payments, net of refunds, of $217,724 in 2012, $512,092 in 2011 and $391,965 in 2010.