20.

Income Taxes

Components of earnings from continuing operations before income taxes and noncontrolling interests are as follows (in thousands):

Year Ended December 31,

2012

2011

2010

United States

854,705

1,241,465

260,794

Foreign

(1,765)

10,347

6,321

852,940

1,251,812

267,115

The provision for income taxes consists of the following (in thousands):

Year Ended December 31,

2012

2011

2010

Current:

Federal

261,552

329,076

(66,462

)

State

20,337

1,685

(19,297

)

Foreign

3,199

2,016

8,289

Total current

285,088

332,777

(77,470

)

Deferred:

Federal

(23,052

)

55,124

138,662

State

(10,440

)

10,400

12,223

Foreign

8,218

(7,473

)

(12,623

)

Total deferred

(25,274

)

58,051

138,262

Total provision for income taxes

259,814

390,828

60,792

A reconciliation of the federal statutory tax rate (35%) to the total provision is as follows:

Year Ended December 31,

2012

2011

2010

Taxes computed at statutory rate

35.00%

State income taxes, net of federal income tax benefit

0.75

0.63

(1.72

)

Federal research credit

(0.28

)

(1.19

)

Domestic manufacturing deduction

(3.25)

(2.21

)

Equity in losses of foreign joint ventures

1.43

0.64

3.09

Foreign rate differential

0.60

(0.92

)

(3.83

)

Noncontrolling interests

(3.64)

(2.32

)

(9.47

)

Other, net

(0.43)

0.68

0.88

Provision for income taxes

30.46%

31.22%

22.76%

Deferred tax assets and liabilities resulted from the following (in thousands):


	December 31,
	2012			2011
Deferred tax assets:
Accrued liabilities and reserves	$	108,287		$	115,752
Allowance for doubtful accounts		14,212			14,088
Inventory		174,499			142,236
Post-retirement benefits		11,119			8,260
Natural gas hedges		221			22,433
Net operating loss carryforward		15,033			25,739
Cumulative translation adjustments		-			2,254
Tax credit carryforwards		28,600			39,700

Total deferred tax assets		351,971			370,462


Deferred tax liabilities:
Holdbacks and amounts not due under contracts		(17,523	)		(9,406	)
Cumulative translation adjustments		(1,600	)		-
Intangibles		(233,413	)		(236,627	)
Property, plant and equipment		(475,176	)		(461,915	)

Total deferred tax liabilities		(727,712	)		(707,948	)


Total net deferred tax liabilities	$	(375,741	)	$	(337,486	)

Current deferred tax assets included in other current assets were $190.4 million at December 31, 2012 ($195.9 million at December 31, 2011). Non-current deferred tax liabilities included in deferred credits and other liabilities were $566.1 million at December 31, 2012 ($533.4 million at December 31, 2011). Nucor paid $313.5 million in net federal, state and foreign income taxes in 2012 (paid $322.4 million in net federal, state and foreign income taxes in 2011, and received $245.0 million in refunds in 2010).

Cumulative undistributed foreign earnings for which U.S. taxes have not been provided are included in consolidated retained earnings in the amount of $176.5 million at December 31, 2012 ($168.0 million at December 31, 2011). These earnings are considered to be indefinitely reinvested and, accordingly, no provisions for U.S. federal and state income taxes are required. It is not practicable to determine the amount of unrecognized deferred tax liability related to the unremitted earnings.

State net operating loss carryforwards were $418.8 million at December 31, 2012 ($490.8 million at December 31, 2011). If unused, they will expire between 2014 and 2032. Foreign net operating loss carryforwards were $59.2 million at December 31, 2012 ($66.2 million at December 31, 2011). If unused, they will expire between 2027 and 2029.

At December 31, 2012, Nucor had approximately $80.9 million of unrecognized tax benefits, of which $76.4 million would affect Nucor’s effective tax rate, if recognized. At December 31, 2011, Nucor had approximately $80.9 million of unrecognized tax benefits, of which $78.5 million would affect Nucor’s effective tax rate, if recognized.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits recorded in deferred credits and other liabilities is as follows (in thousands):

December 31,

2012

2011

2010

Balance at beginning of year

80,897

92,752

108,587

Additions based on tax positions related to current year

9,456

6,733

1,983

Reductions based on tax positions related to current year

(132

)

(3,160

)

(1,358

)

Additions based on tax positions related to prior years

5,821

937

5,705

Reductions based on tax positions related to prior years

(3,296

)

(2,169

)

(4,046

)

Additions due to settlements with taxing authorities

2,363

Reductions due to settlements with taxing authorities

(764

)

(958

)

(3,246

)

Reductions due to statute of limitations lapse

(11,120

)

(13,238

)

(17,236

)

Balance at end of year

80,862

80,897

92,752

We estimate that in the next twelve months, our gross uncertain tax positions, exclusive of interest, could decrease by as much as $19.3 million, as a result of the expiration of the statute of limitations.

During 2012, Nucor recognized $2.1 million of expense in interest and penalties ($3.6 million of expense in 2011 and $5.3 million of benefit in 2010). As of December 31, 2012, Nucor had approximately $36.4 million of accrued interest and penalties related to uncertain tax positions ($34.3 million at December 31, 2011).

Nucor has concluded U.S. federal income tax matters for years through 2006. The years 2004 and 2007 are open to the extent net operating losses were carried back. The 2008 to 2012 tax years are open to examination by the Internal Revenue Service. In 2011 the Canada Revenue Agency completed an audit examination for the periods 2006 to 2008 for Harris Steel Group Inc. and subsidiaries with immaterial adjustments to the income tax returns. The tax years 2008 through 2012 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).