Note 14 — Income Taxes

The provision for/(benefit from) income taxes consisted of the following:


	Year Ended December 31,
	2011			2010			2009
	(In thousands)
Current:
Federal	$	(2,850	)	$	176		$	(28,979	)
State		336			1,521			379
Foreign		13,601			(1,243	)		(82,992	)

Total current taxes		11,087			454			(111,592	)


Deferred:
Federal		(7,240	)		3,494			3,334
State		211			344			248
Foreign		(280	)		(1,122	)		(1,311	)

Total deferred taxes		(7,309	)		2,716			2,271

Total	$	3,778		$	3,170		$	(109,321	)

The following table summarizes the domestic and foreign components of income/(loss) before income taxes:


	Year Ended December 31,
	2011			2010			2009
	(In thousands)
Domestic	$	(31,636	)	$	(115,078	)	$	(150,329	)
Foreign		125,426			152,652			(19,295	)

Income/(loss) before income taxes	$	93,790		$	37,574		$	(169,624	)

The following table summarizes significant components of the Company's deferred tax assets and liabilities:


	December 31,
	2011			2010
	(In thousands)
Deferred tax assets:
Tax credit carryovers	$	408,444		$	432,707
Net operating loss carryforwards		989,989			1,338,831
Capital loss carryover		552			147,107
Future deductions for purchased intangible assets		152,507			178,906
Depreciation and amortization		120,764			105,349
Pension and post-retirement benefits		220,747			165,718
Future deductions for reserves and other		155,618			195,840

Total deferred tax assets		2,048,621			2,564,458
Valuation allowance		(1,902,187	)		(2,385,677	)

Net deferred tax assets		146,434			178,781


Deferred tax liabilities:
Tax deductible goodwill		(17,120	)		(36,338	)
Purchased intangible assets		(130,219	)		(172,186	)

Total deferred tax liabilities		(147,339	)		(208,524	)

Total net deferred tax liabilities	$	(905	)	$	(29,743	)

Valuation allowances reduce the deferred tax assets to the amount that, based upon all available evidence, is more likely than not to be realized. The deferred tax assets' valuation allowance is attributed to U.S. federal, state and certain foreign deferred tax assets primarily consisting of reserves, other one-time charges, purchased intangible assets, tax credit carryovers and net operating loss carryovers that could not be benefited under existing carry-back rules. Approximately $102.0 million of the valuation allowance at December 31, 2011 relates to tax benefits from stock option deductions, which will be credited to equity if and when realized. The deferred tax asset for net operating loss carryforwards decreased by $328.5 million in 2011 due to a reduction in the carryforward amount on the tax return pursuant to the position Internal Revenue Service is currently taking. Further, the Company realized benefits of deferred tax assets during the year of $116.5 million related to discontinued operations.

As of December 31, 2011, the Company had federal, state and foreign net operating loss carryovers of approximately $2,456.4 million, $1,386.5 million and $152.4 million, respectively. The federal net operating losses will begin expiring in 2021 through 2030. Certain state net operating losses will begin expiring in 2012 through 2031. The foreign net operating losses will carry forward indefinitely. Approximately $2,273.4 million of the federal net operating loss carryover and $1,082.4 million of the state net operating loss carryover relate to acquisitions and are subject to certain limitations under Section 382 of the Internal Revenue Code of 1986. As of December 31, 2011, the Company had tax credits of approximately $456.0 million, which will begin expiring in 2012.

A reconciliation of the provision for/(benefit from) income taxes with the amount computed by applying the statutory federal income tax rate to income/(loss) before income taxes for the years ended December 31, 2011, 2010 and 2009 is as follows:


	Year Ended December 31,
	2011			2010			2009
	(In thousands)
Expected tax expense/(benefit) at federal statutory rate of 35%	$	32,826		$	13,151		$	(59,368	)
State taxes, net of federal benefit		130			715			75
Foreign rate differential		(37,428	)		(39,912	)		6,432
U.S. taxes on foreign earnings		32,793			36,128			16,349
Withholding taxes		8,770			5,933			5,786
Settlements of foreign tax audits		—			—			(81,047	)
Change in valuation allowance		(32,233	)		2,921			28,523
Nondeductible expenses		8,047			5,731			4,131
Unrecognized tax benefits		6,054			(17,755	)		2,496
Tax refunds/credits		(2,926	)		(3,140	)		(2,057	)
Tax benefit related to refundable R&D/alternative minimum tax credit		(530	)		—			(3,595	)
Intraperiod allocation of tax benefit to continuing operations		(11,725	)		(644	)		(27,603	)
Other		—			42			557

Total tax provision/(benefit)	$	3,778		$	3,170		$	(109,321	)

The Company paid income taxes, net of refunds received, of $11.8 million, $29.3 million and $24.6 million for the years ended December 31, 2011, 2010 and 2009, respectively.

The Company has a tax holiday in effect for its business operations in Singapore effective January 1, 2009. The tax holiday allows for a reduced tax rate of 10% on the qualifying profits generated through December 31, 2018. For the years ended December 31, 2011, 2010 and 2009, the tax savings from this holiday were approximately $2.0 million, $2.1 million and $2.0 million, respectively, with no material per-share impact.

In 2009, the Company recorded an income tax benefit of $3.6 million related to refundable research and development tax credits due to the enactment of the Housing and Economic Recovery Act of 2008. The American Recovery and Reinvestment Act of 2009 extended this temporary benefit through 2009.

In 2009, with settlements of tax audits in foreign jurisdictions, the Company recognized a tax benefit of $81.0 million, which included unrecognized tax benefits of $71.9 million and interest and penalties of $9.1 million.

The Company has not provided for U.S. income and foreign withholding taxes on $83.1 million of cumulative undistributed earnings of various non-U.S. subsidiaries. Such earnings are intended to be reinvested in the non-U.S. subsidiaries for an indefinite period of time. It is not practicable to compute the amount of incremental taxes that would result from the repatriation of those earnings.

Uncertain Income Tax Positions

As of December 31, 2011 and 2010, the Company had $171.0 million and $151.9 million of unrecognized tax benefits, respectively. The $171.0 million as of December 31, 2011 is related to unrecognized tax benefits that, if realized, would affect the effective tax rate of the Company.

The Company is unable to make a reasonably reliable estimate as to when cash settlement with a taxing authority may occur. It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the next 12 months. Such changes could occur based on the normal expiration of statutes of limitations or the possible conclusion of ongoing tax audits in various jurisdictions around the world. If those events occur within the next 12 months, the Company estimates that unrecognized tax benefits, plus accrued interest and penalties, could decrease by up to $17.7 million.

The Company files income tax returns at the U.S. federal level and in various state and foreign jurisdictions. With some exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2007. In 2009, the Company's subsidiary in Singapore settled its 1999 to 2007 income tax audit and the subsidiary in Hong Kong settled its 1997 to 2008 income tax audit.

The Company recognizes interest and penalties accrued in relation to unrecognized tax benefits as a tax expense. For the years ended December 31, 2011, 2010 and 2009, the Company recorded charges to tax expense of approximately $6.3 million, $7.7 million and $18.6 million for interest and penalties, respectively. Also, for the years ended December 31, 2011, 2010 and 2009, the Company recorded tax benefits of approximately $8.6 million, $17.7 million and $32.0 million for interest and penalties, respectively, as a result of reductions to tax positions taken in a prior year, lapses in statutes of limitations and audit settlements. As of December 31, 2011 and 2010, the Company had $29.6 million and $31.8 million, respectively, of accrued interest and penalties which are included in non-current income tax liabilities in the consolidated balance sheets.

The following table sets forth a reconciliation of the beginning and ending amounts of the liability for unrecognized tax benefits:


	Year Ended December 31,
	2011			2010			2009
	(In thousands)
Balance at January 1	$	151,898		$	163,859		$	232,050
Tax positions related to current year:
Additions		19,482			10,874			10,738
Tax positions related to prior years:
Additions		29,312			1,541			54,058
Reductions		(20,156	)		(800	)		—
Lapses in statute of limitations		(9,580	)		(14,174	)		(16,374	)
Settlements		—			—			(96,926	)
Payments		—			(9,780	)		(22,151	)
Foreign exchange loss		38			378			2,464

Balance at December 31	$	170,994		$	151,898		$	163,859