12. Income Taxes

The components of income before taxes are as follows:


	2013		2012		2011
Domestic	$	544.5	$	481.8	$	441.1
Foreign		53.3		60.7		53.5

Total	$	597.8	$	542.5	$	494.6

The following table summarizes the provision for U.S. federal, state and foreign income taxes:


	2013			2012		2011
Current:
U.S. federal	$	151.7		$	132.0	$	92.7
State		24.7			27.7		16.3
Foreign		15.9			19.8		16.6

		192.3			179.5		125.6

Deferred:
U.S. federal		12.6			11.4		48.7
State		(1.7	)		1.6		(3.3	)
Foreign		0.2			0.2		14.0

		11.1			13.2		59.4

Total provision	$	203.4		$	192.7	$	185.0

Deferred tax assets (liabilities) consist of the following at December 31:


	2013			2012
Deferred tax assets:
Accounts receivable	$	4.4		$	6.5
Deferred compensation		57.2			49.7
Pension, postretirement and postemployment benefits		9.7			16.5
Reserves		31.6			26.1
Tax credit carryforwards/other tax attributes		1.5			1.2
International operating loss carryforwards		8.1			9.2

Total gross deferred tax assets		112.5			109.2
Valuation allowances		(13.0	)		(15.7	)

Total deferred tax assets		99.5			93.5

Deferred tax liabilities:
Goodwill		(159.7	)		(145.1	)
Tradenames and other intangibles		(292.2	)		(289.4	)
Property, plant and equipment		(106.2	)		(108.8	)

Total deferred tax liabilities		(558.1	)		(543.3	)

Net deferred tax liability	$	(458.6	)	$	(449.8	)

Current net deferred tax asset	$	16.6		$	17.6
Long term net deferred tax asset		0.8			2.6
Long term net deferred tax liability		(476.0	)		(470.0	)

Net deferred tax liability	$	(458.6	)	$	(449.8	)

The difference between tax expense and the tax that would result from the application of the federal statutory rate is as follows:


	2013			2012			2011
Statutory rate		35	%		35	%		35	%
Tax that would result from use of the federal statutory rate	$	209.2		$	189.9		$	173.1
State and local income tax, net of federal effect		14.9			19.0			12.1
Varying tax rates of foreign affiliates		(3.1	)		(1.8	)		(2.5	)
Benefit from domestic manufacturing deduction		(13.2	)		(11.6	)		(8.3	)
Resolution of tax contingencies		0.0			(3.2	)		(3.7	)
Valuation Allowances		0.6			0.6			14.3
Other		(5.0	)		(0.2	)		0.0

Recorded tax expense	$	203.4		$	192.7		$	185.0

Effective tax rate		34.0	%		35.5	%		37.4	%

At December 31, 2013, foreign subsidiaries of the Company had net operating loss carryforwards of approximately $28.0. Approximately $3.7 of such net operating loss carryforwards expire on various dates through December 31, 2018. The remaining net operating loss carryforwards are not subject to expiration.

The Company believes that it is more likely than not that the benefit from these net operating loss carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance of $8.1 and $9.2 at December 31, 2013 and 2012, respectively, on the deferred tax asset relating to these net operating loss carryforwards.

The Company also believes that it is more likely than not that the benefit from certain additional deferred tax assets of QGN will not be realized. In recognition of this risk, the Company maintains a valuation allowance of $4.9 and $6.5 at December 31, 2013 and 2012, respectively, on these deferred tax assets.

The Company had undistributed earnings of foreign subsidiaries of approximately $271.8 at December 31, 2013 for which deferred taxes have not been provided. These earnings, which are considered to be permanently reinvested, would be subject to U.S. tax if they were remitted as dividends. It is not practicable to determine the deferred tax liability on these earnings.

The Company has recorded liabilities in connection with uncertain tax positions, which, although supportable by the Company, may be challenged by tax authorities. Under applicable accounting guidance, these tax positions do not meet the minimum threshold required for the related tax benefit to be recognized in the income statement.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2013			2012			2011
Unrecognized tax benefits at January 1	$	9.1		$	13.1		$	24.6
Gross increases—tax positions in prior period		0.9			1.9			1.0
Gross decreases—tax positions in prior period		0.0			(3.2	)		(5.5	)
Settlements		(3.7	)		(2.6	)		(6.8	)
Lapse of statute of limitations		(0.4	)		(0.1	)		(0.2	)

Unrecognized tax benefits at December 31	$	5.9		$	9.1		$	13.1

In 2012, the Company recognized a benefit from the reversal of approximately $3.3 in income tax expense and incurred $0.2 in pretax interest expense associated with certain tax liabilities as a result of the settlement of an IRS audit for the years 2008 and 2009 and the lapse of applicable statutes of limitation of several state taxing authorities. In 2011, the Company recognized a benefit from the reversal of approximately $3.7 in income tax expense and $1.6 in pretax interest expense associated with certain tax liabilities as a result of the settlement of various state audits and the lapse of applicable statutes of limitation of several state taxing authorities.

Included in the balance of unrecognized tax benefits at December 31, 2013, 2012 and 2011 are $5.7, $8.7 and $12.1, respectively, of tax benefits that, if recognized, would affect the effective tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2013, 2012 and 2011, are $0.2, $0.4 and $1.0, respectively, of tax benefits that, if recognized, would result in adjustments to balance sheet tax accounts, primarily deferred taxes.

The Company is subject to U.S. federal income tax as well as income tax in multiple state and international jurisdictions. The tax years 2010 and 2011 are currently under audit by the U.S. Internal Revenue Service and several state taxing authorities. In addition, certain statutes of limitations are scheduled to expire in the near future. The Company does not anticipate that the settlement of audits and the expirations of statutes of limitations within the next twelve months will result in a significant change in unrecognized tax benefits.

The Company’s policy for recording interest associated with uncertain tax positions is to record interest as a component of income before income taxes. During the twelve months ended December 31, 2013, December 31, 2012 and December 31, 2011, the Company recognized a net reversal of accrued interest expense associated with uncertain tax positions of approximately $0.1, $0.3, and $1.9, respectively. As of December 31, 2013 and December 31, 2012, the Company had $0.3 and $0.4, respectively, in accrued interest expense related to unrecognized tax benefits.