We and our domestic subsidiaries file a consolidated Federal income tax return. Taxes based on income for the years ended June 30 have been provided as follows:


	2012	2011	2010
Currently payable:
Federal....................................................................................	$ 41,214	$ 43,140	$ 55,422
State and local......................................................................	4,116	4,542	3,933
Total current provision.....................................................	45,330	47,682	59,355
Deferred Federal, state and local provision...........................	4,893	7,460	814
Total taxes based on income..........................................	$ 50,223	$ 55,142	$ 60,169

Certain tax benefits recorded directly to common stock for each of the years ending June 30 were as follows:


	2012	2011	2010
Tax benefits recorded directly to common stock..............	$301	$479	$674

For the years ended June 30, our effective tax rate varied from the statutory Federal income tax rate as a result of the following factors:


	2012	2011	2010
Statutory rate........................................................................................	35.0 %	35.0 %	35.0 %
State and local income taxes.............................................................	2.0 %	1.9 %	1.5 %
ESOP dividend deduction...................................................................	(0.2)%	(0.2)%	(0.1)%
Domestic manufacturing deduction.................................................	(2.5)%	(2.5)%	(1.9)%
Other.......................................................................................................	0.1 %	(0.1)%	(0.1)%
Effective rate..................................................................................	34.4 %	34.1 %	34.4 %

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30 were comprised of:


	2012	2011
Deferred tax assets:
Inventories...........................................................................................................	$ 2,774	$ 4,101
Employee medical and other benefits............................................................	13,201	9,459
Receivable and other allowances....................................................................	4,699	4,423
Other accrued liabilities.....................................................................................	2,869	3,437
Total deferred tax assets..............................................................................	23,543	21,420
Deferred tax liabilities:
Property, plant and equipment........................................................................	(20,744)	(16,516)
Goodwill...............................................................................................................	(3,427)	(3,083)
Other.....................................................................................................................	(274)	(830)
Total deferred tax liabilities.........................................................................	(24,445)	(20,429)
Net deferred tax (liability) asset.............................................................	$ (902)	$ 991

Net current deferred tax assets and prepaid Federal, state and local income taxes were included in Deferred Income Taxes and Other Current Assets on the Consolidated Balance Sheet. The related balances at June 30 were as follows:


	2012	2011
Net current deferred tax assets.........................................................................	$ 13,168	$ 15,739
Prepaid Federal, state and local income taxes..............................................	$ 1,958	$ 8,140

Cash payments for income taxes for each of the years ending June 30 were as follows:


	2012	2011	2010
Cash payments for income taxes........................................	$ 38,726	$ 47,598	$ 66,236

The gross tax contingency reserve at June 30, 2012 was approximately $1.9 million. The unrecognized tax benefits recorded as the gross tax contingency reserve noted in the following table for June 30, 2012 and 2011 would affect our effective tax rate, if recognized.

The following table sets forth changes in our total gross tax contingency reserve (including interest and penalties):


	2012	2011
Balance, beginning of year.................................................................................	$1,795	$ 1,921
Tax positions related to current year:
Additions............................................................................................................	17	18
Reductions.........................................................................................................	–	–
Tax positions related to prior years:
Additions............................................................................................................	149	455
Reductions.........................................................................................................	(22)	(599)
Balance, end of year..................................................................................	$1,939	$ 1,795

We classified approximately $0.1 million of the gross tax contingency reserve at June 30, 2012 as current liabilities as these amounts are expected to be resolved within the next 12 months. The remaining liability of approximately $1.8 million was included in long-term liabilities. We expect that the amount of these liabilities will change within the next 12 months; however, we do not expect the change to have a significant effect on our financial position or results of operations.

During 2010, we executed several state tax voluntary disclosure agreements. The settlement of these liabilities resulted in pre-tax income of approximately $0.9 million, which impacted our effective tax rate for 2010 by approximately 0.4%.

We recognize interest and penalties related to these tax liabilities in income tax expense. For each of the years ended June 30, we recognized the change in the accrual for net tax-related interest and penalties as follows:


	2012	2011
Expense recognized for the net tax-related interest and penalties.....................	$120	$ 96

We had accrued interest and penalties at June 30 as follows:


	2012	2011
Accrued interest and penalties included in the gross tax contingency reserve..	$ 922	$ 802

We file income tax returns in the U.S. and various state and local jurisdictions. With limited exceptions, we are no longer subject to examination of U.S. Federal or state and local income taxes for years prior to 2009.

The American Jobs Creation Act provided a tax deduction calculated as a percentage of qualified income from manufacturing in the United States. The deduction percentage for 2012 was 9%. In accordance with FASB guidance, this deduction is treated as a special deduction, as opposed to a tax rate reduction.