Income Taxes

The provision for income taxes for the years ended December 31 consists of the following:



	2011			2010		2009
Current
Federal	$	113,937		$	88,302	$	23,078
State	19,416			13,482		636
International	88,509			80,461		22,389
	221,862			182,245		46,103
Deferred
Federal	25,729			12,143		20,905
State	3,328			4,153		5,995
International	(40,434		)	837		(7,587		)
	(11,377		)	17,133		19,313
	$	210,485		$	199,378	$	65,416

The principal causes of the difference between the U.S. federal statutory tax rate of 35% and effective income tax rates for the years ended December 31 are as follows:



	2011			2010			2009
United States	$	405,508		$	313,127		$	108,106
International	404,293			365,876			80,815
Income before income taxes	$	809,801		$	679,003		$	188,921

Provision at statutory tax rate	$	283,430		$	237,651		$	66,122
State taxes, net of federal benefit	14,784			11,463			4,310
International effective tax rate differential	(48,785		)	(61,868		)	(42,333		)
Change in valuation allowance	(49,826		)	11,945			25,803
Other non-deductible expenses	4,744			4,040			2,634
Changes in tax accruals	12,437			(2,145		)	8,258
Other	(6,299		)	(1,708		)	622
Provision for income taxes	$	210,485		$	199,378		$	65,416

In the fourth quarter of 2011, the company recorded a net reduction in the provision for income taxes of $28,928 principally due to a reversal of a valuation allowance on certain international deferred tax assets as a result of a realignment of the company's international business operations.

In 2010, the company recorded a net reduction of the provision for income taxes of $9,404 and a reduction of interest expense of $3,840 ($2,312 net of related taxes) primarily related to the settlement of certain tax matters covering multiple years.

At December 31, 2011, the company had a liability for unrecognized tax benefits of $63,498 (substantially all of which, if recognized, would favorably affect the company's effective tax rate), of which approximately $8,000 is expected to be paid over the next twelve months. The company does not believe there will be any other material changes in its unrecognized tax positions over the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows:



	2011			2010
Balance at beginning of year	$	66,110		$	68,833
Additions based on tax positions taken during a prior period	10,850			14,067
Reductions based on tax positions taken during a prior period	(2,389		)	(20,273		)
Additions based on tax positions taken during the current period	7,602			5,835
Reductions based on tax positions taken during the current period	—			—
Reductions related to settlement of tax matters	(12,879		)	(65		)
Reductions related to a lapse of applicable statute of limitations	(5,796		)	(2,287		)
Balance at end of year	$	63,498		$	66,110

Interest costs related to unrecognized tax benefits are classified as a component of "Interest and other financing expense, net" in the company's consolidated statements of operations. In 2011, 2010, and 2009 the company recognized $2,068, $(1,599), and $4,678, respectively, of interest expense related to unrecognized tax benefits. At December 31, 2011 and 2010, the company had a liability for the payment of interest of $13,411 and $12,348, respectively, related to unrecognized tax benefits.

In many cases the company's uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2011:



United States - Federal		2008 - present
United States - State		2005 - present
Germany (a)		2007 - present
Hong Kong		2005 - present
Italy (a)		2007 - present
Sweden		2005 - present
United Kingdom		2009 - present

(a) Includes federal as well as local jurisdictions.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.

The significant components of the company's deferred tax assets and liabilities, included primarily in "Other current assets," "Other assets," "Accrued expenses," and "Other liabilities" in the company's consolidated balance sheets, consist of the following at December 31:



	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	79,317		$	80,271
Inventory adjustments	39,595			33,004
Allowance for doubtful accounts	14,401			9,271
Accrued expenses	61,589			58,312
Interest carryforward	52,606			47,247
Stock-based compensation awards	12,330			13,503
Other comprehensive income items	12,475			—
Goodwill	—			8,462
Other	—			4,394
	272,313			254,464
Valuation allowance	(30,675		)	(80,501		)
Total deferred tax assets	$	241,638		$	173,963

Deferred tax liabilities:
Goodwill	$	(9,060	)	$	—
Depreciation	(57,346		)	(21,055		)
Intangible assets	(60,100		)	(55,858		)
Other	(1,916		)	(3,263		)
Total deferred tax liabilities	$	(128,422	)	$	(80,176	)
Total net deferred tax assets	$	113,216		$	93,787

At December 31, 2011, certain international subsidiaries had tax loss carryforwards of approximately $156,335 expiring in various years after 2012 and deferred tax assets related to the tax loss carryforwards of the international subsidiaries in the amount of $44,654 were recorded with a corresponding valuation allowance of $26,321.

The company also has Federal net operating loss carryforwards of approximately $88,244 and $81,523 at December 31, 2011 and 2010, respectively, which relate to recently acquired subsidiaries. These Federal net operating losses expire in various years beginning after 2020. As of December 31, 2011 and 2010, the company has an agreement with the sellers of an acquired business to reimburse them for the company's utilization of approximately of $72,155 and $56,866, respectively, of these Federal net operating loss carryforwards.

Valuation allowances reflect the deferred tax benefits that management is uncertain of the ability to utilize in the future.

Cumulative undistributed earnings of international subsidiaries were $2,616,108 at December 31, 2011. No deferred Federal income taxes were provided for the undistributed earnings as they are permanently reinvested in the company's international operations.

Income taxes paid, net of income taxes refunded, amounted to $394,277, $233,852, and $90,340 in 2011, 2010, and 2009, respectively