10. INCOME TAXES

The provision for income taxes consisted of the following for the years ended December 31, 2012, 2011 and 2010:


	2012			2011		2010
	(in millions)
Current provision:
Federal	$	708		$	732	$	786
States and Puerto Rico		61			62		63

Total current provision		769			794		849
Deferred (benefit) provision		(80	)		22		(199	)

Provision for income taxes	$	689		$	816	$	650

The provision for income taxes was different from the amount computed using the federal statutory rate for the years ended December 31, 2012, 2011 and 2010 due to the following:


	2012			2011			2010
	(in millions)
Income tax provision at federal statutory rate	$	669		$	782		$	612
States, net of federal benefit, and Puerto Rico		27			35			31
Tax exempt investment income		(26	)		(25	)		(24	)
Nondeductible executive compensation		14			11			13
Other, net		5			13			18

Provision for income taxes	$	689		$	816		$	650

The provision for income taxes for 2012, 2011, and 2010 reflects a $14 million, $11 million and $13 million, respectively, estimated impact from limitations on the deductibility of annual compensation in excess of $500,000 per employee as mandated by the Health Insurance Reform Legislation.

As of December 31, 2012, we do not have material uncertain tax positions reflected in our consolidated balance sheet.

Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates expected to be in effect when the reported amounts are actually recovered or settled. Principal components of our net deferred tax balances at December 31, 2012 and 2011 were as follows:


	Assets (Liabilities)
	2012			2011
	(in millions)
Future policy benefits payable	$	246		$	179
Net operating loss carryforward		203			181
Compensation and other accrued expenses		174			95
Benefits payable		91			111
Deferred acquisition costs		37			35
Capital loss carryforward		13			13
Unearned premiums		11			11
Other		9			20

Total deferred income tax assets		784			645

Valuation allowance		(28	)		(28	)

Total deferred income tax assets, net of valuation allowance		756			617

Depreciable property and intangible assets		(465	)		(347	)
Investment securities		(265	)		(191	)
Prepaid expenses		(59	)		(49	)

Total deferred income tax liabilities		(789	)		(587	)

Total net deferred income tax (liabilities) assets	$	(33	)	$	30

Amounts recognized in the consolidated balance sheets:
Other long-term assets	$	12		$	46
Trade accounts payable and accrued expenses		(45	)		(16	)

Total net deferred income tax (liabilities) assets	$	(33	)	$	30

At December 31, 2012, we had approximately $555 million of net operating losses to carry forward related to prior acquisitions. These net operating loss carryforwards, if not used to offset future taxable income, will expire from 2013 through 2031. A significant portion of these losses are in a subsidiary that will not be included in the Humana Inc. consolidated tax return until 2013, and, therefore, may not be used until that point. Due to limitations and uncertainty regarding our ability to use some of the carryforwards, a valuation allowance was established on $77 million of net operating loss carryforwards related to prior acquisitions. For the remainder of the net operating loss carryforwards, based on our historical record of producing taxable income and profitability, we have concluded that future operating income will be sufficient to give rise to tax expense to recover all deferred tax assets.

We file income tax returns in the United States and certain foreign jurisdictions. The U.S. Internal Revenue Service, or IRS, has completed its examinations of our consolidated income tax returns for 2011 and prior years. Our 2012 tax return is under advance review by the IRS under its Compliance Assurance Process. With few exceptions, which are immaterial in the aggregate, we no longer are subject to state, local and foreign tax examinations for years before 2009. As of December 31, 2012, we are not aware of any material adjustments that may be proposed.