11. Income Taxes

Income before the provision for income taxes is attributable to the following jurisdictions (in thousands) for years ended December 31:


	2011		2010		2009
United States	$	144,928	$	92,979	$	83,561
Foreign		65,949		58,301		46,054

Total	$	210,877	$	151,280	$	129,615

The provision (benefit) for income taxes for the years ended December 31 consists of the following (in thousands):


	2011			2010			2009
Current:
Federal	$	45,817		$	31,337		$	16,636
State		2,578			2,545			1,321
Foreign		17,375			13,496			13,355

Total current		65,770			47,378			31,312
Deferred:
Federal		1,538			(1,308	)		10,558
State		132			(93	)		900
Foreign		(3,898	)		(2,593	)		(2,207	)

Total deferred		(2,228	)		(3,994	)		9,251

Total provision	$	63,542		$	43,384		$	40,563

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 35% to income before income taxes for the years ended December 31 due to the following (in thousands):


	2011					2010					2009
Computed "expected" tax expense	$	73,807		35.00	%	$	52,948		35.00	%	$	43,565		35.00	%
Changes resulting from:
Foreign income tax differential		(8,333	)	(3.95	)		(7,074	)	(4.68	)		(6,025	)	(4.65	)
State taxes net of federal benefits		1,923		0.91			1,279		0.85			1,490		1.15
Foreign-sourced non taxable income		(4,423	)	(2.10	)		(3,873	)	(2.56	)		(2,825	)	(2.18	)
Other		568		0.27			104		0.07			2,558		1.98

Provision for income taxes	$	63,542		30.13	%	$	43,384		28.68	%	$	40,563		31.30	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31 are as follows (in thousands):


	2011			2010
Deferred tax assets:
Accounts receivable, principally due to the allowance for doubtful accounts	$	3,251		$	3,201
Accrued expenses not currently deductible for tax		1,652			1,284
Stock based compensation		8,289			6,070
Foreign tax credit		177			177
Net operating loss carryforwards		3,168			2,865
Other		363			217

Deferred tax assets before valuation allowance		16,900			13,814
Valuation allowance		(1,709	)		(1,784	)

Deferred tax assets, net		15,191			12,030

Deferred tax liabilities:
Property and equipment, principally due to differences between book and tax depreciation		(4,020	)		(2,297	)
Intangibles—including goodwill		(119,254	)		(88,504	)

Deferred tax liabilities		(123,274	)		(90,801	)

Net deferred tax liabilities	$	(108,083	)	$	(78,771	)

The Company's deferred tax balances are classified in its balance sheets based on net current items and net non-current items as of December 31 as follows (in thousands):


	2011			2010
Current deferred tax assets and liabilities:
Current deferred tax assets	$	4,797		$	4,484
Long term deferred tax assets and liabilities:
Long term deferred tax assets		10,394			7,546
Long term deferred tax liabilities		(123,274	)		(90,801	)

Net long term deferred tax liabilities		(112,880	)		(83,255	)

Net deferred tax liabilities	$	(108,083	)	$	(78,771	)

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of certain stock options. To the extent realized tax deductions for options exceed the amount previously recognized as deferred tax benefits related to share-based compensation for these option awards, we record an excess tax benefit in stockholders' equity. We recorded excess tax benefits of $13.7 million, $10.7 million and $0.0 million in the years ended 2011, 2010 and 2009, respectively.

At December 31, 2011, U.S. taxes were not provided on earnings of the Company's foreign subsidiaries. The Company's intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax effective through the utilization of foreign tax credits. If in the future these earnings are repatriated to the U.S, or if the Company determines that the earnings will be remitted in the foreseeable future, an additional tax provision and related liability may be required. If such earnings were distributed, U.S. income taxes would be partially reduced by available credits for taxes paid to the jurisdictions in which the income was earned. Cumulative undistributed earnings of non-U.S. subsidiaries for which U.S. taxes have not been provided are included in consolidated retained earnings in the amount of approximately $263.8 million, $197.9 million, and $139.5 million at December 31, 2011, 2010, and 2009, respectively. Because of the availability of United States foreign tax credits, it is not practicable to determine the domestic federal income tax liability that would be payable if such earnings were not reinvested indefinitely.

The valuation allowance for deferred tax assets at December 31, 2011 and 2010 was $1.7 million and $1.8 million, respectively. The valuation allowance relates to foreign and state net operating loss carryforwards and foreign tax credit carryforwards. The net change in the total valuation allowance for the years ended December 31, 2011 and 2010 was a decrease of $0.1 million.

As of December 31, 2011, the Company had net operating loss carryforwards for state income tax purposes of $58.7 million that are available to offset future state taxable income through 2023. Additionally, the Company had $1.9 million of net operating loss carryforwards for foreign income tax purposes that are available to offset future foreign taxable income. The foreign net operating loss carryforwards will not expire in future years.

The Company recognizes interest and penalties on unrecognized tax benefits (including interest and penalties calculated on uncertain tax positions on which the Company believes it will ultimately prevail) within the provision for income taxes on continuing operations in the consolidated financial statements. This policy is a continuation of the Company's policy prior to adoption of the guidance regarding uncertain tax positions. As of December 31, 2011 and 2010, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $0.9 million and $0.5 million, respectively.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company's U.S. federal income tax returns has expired for years prior to 2007. The statute of limitations for the Company's U.K. income tax returns has expired for years prior to 2010. The statute of limitations has expired for years prior to 2008 for the Company's Czech Republic income tax returns.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits including interest for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands):


Unrecognized tax benefits at January 1, 2009	$	3,601
Additions based on tax provisions related to the current year		859
Deductions based on settlement/expiration of prior year tax positions		(417	)

Unrecognized tax benefits at December 31, 2009		3,601
Additions based on tax provisions related to the current year		549
Deductions based on settlement/expiration of prior year tax positions		(680	)

Unrecognized tax benefits at December 31, 2010		3,912
Additions based on tax provisions related to the current year		524
Additions based on tax provisions related to the prior year		1,010
Deductions based on settlement/expiration of prior year tax positions		(452	)

Unrecognized tax benefits at December 31, 2011	$	4,994

As of December 31, 2011 the Company had total unrecognized tax benefits of $5.0 million of which $4.3 million, if recognized, would affect its effective tax rate. It is not anticipated that there are any unrecognized tax benefits that will significantly increase or decrease within the next twelve months.