INCOME TAXES

The domestic and foreign components of income before provision for income taxes were as follows:



	2011		2010		2009
Domestic	$	195,873	$	28,168	$	207,536
Foreign	235,692		48,405		4,047
Total	$	431,565	$	76,573	$	211,583

Taxes paid were $71,873 in 2011, $40,169 in 2010 and $95,459 in 2009.

The provision/(benefit) for income taxes attributable to the income consisted of:



	2011			2010			2009
Federal:
Current	$	36,552		$	19,790		$	33,716
Deferred	41,848			(11,167		)	4,929
State and local:
Current	9,128			2,759			7,580
Deferred	(474		)	1,305			(215		)
Foreign:
Current	26,825			12,712			3,663
Deferred	(195		)	(2,631		)	—
Total	$	113,684		$	22,768		$	49,673

The Company’s provision for income taxes for the years 2011, 2010 and 2009 was different from the amount computed by applying the statutory United States federal income tax rates to the underlying income as follows:



	2011		2010		2009
Statutory federal tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal income tax benefit	1.2	%	7.5	%	2.3	%
Effects of international jurisdictions, including foreign tax credits	(9.1	)%	(27.3	)%	—	%
Nondeductible short-lived intangible asset and inventory valuation amortization	—	%	24.5	%	—	%
Nondeductible professional fees in connection with Tommy Hilfiger acquisition	—	%	3.4	%	—	%
Unrecognized tax benefits	(0.3	)%	(4.2	)%	(13.1	)%
Decreases in international income tax rates	(1.2	)%	(6.8	)%	—	%
Change in valuation allowance	(1.3	)%	3.4	%	(0.1	)%
Other, net	2.0	%	(5.8	)%	(0.6	)%
Effective tax rate	26.3	%	29.7	%	23.5	%

Effects of international jurisdictions, including foreign tax credits, reflected in the above table for 2011 and 2010 include not only those taxes at statutory income tax rates but also taxes at special rates levied on income from certain jurisdictional activities. The Company expects to benefit from these special rates until 2022.

The components of deferred income tax assets and liabilities were as follows:



	2011			2010
Gross deferred tax assets
Tax loss and credit carryforwards	$	93,311		$	108,145
Employee compensation and benefits	116,448			84,760
Inventories	19,606			18,018
Accounts receivable	14,820			13,156
Property, plant and equipment	—			5,972
Accrued expenses	18,239			27,026
Other, net	19,836			28,134
Subtotal	282,260			285,211
Valuation allowances	(18,932		)	(25,177		)
Total gross deferred tax assets, net of valuation allowances	$	263,328		$	260,034
Gross deferred tax liabilities
Intangibles	$	(701,391	)	$	(710,119	)
Property, plant and equipment	(3,326		)	—
Total gross deferred tax liabilities	$	(704,717	)	$	(710,119	)
Net deferred tax liability	$	(441,389	)	$	(450,085	)

Included in the tax loss and credit carryforwards at the end of 2011 are tax effected state tax loss carryforwards of approximately $17,559, which at current apportionment percentages would equate to approximately $451,274 of income (which is subject to change based upon future apportionment percentages), federal net operating loss carryforwards of $2,698, foreign net operating loss carryforwards of $280,179 and federal and state and local credit carryforwards of $20,286. The carryforwards expire principally between 2012 and 2032. The valuation allowance decrease relates primarily to tax attributes (e.g., state and local and foreign net operating loss carryforwards) for which the Company currently believes it is more likely than not that a portion of these losses will not be realized.

The Company does not provide for deferred taxes on the excess of financial reporting over tax basis on its investments in the foreign subsidiaries that were part of the Tommy Hilfiger acquisition and that are essentially permanent in duration. The earnings that are permanently reinvested were $248,125. The determination of the additional deferred taxes on the excess has not been provided because it is not practicable due to complexities associated with the hypothetical calculation.

Unrecognized tax benefit activity for each year was as follows:



	2011			2010
Balance at beginning of year	$	178,634		$	34,466
Increase due to assumed Tommy Hilfiger positions	—			141,851
Increases related to prior year tax positions	1,502			331
Decreases related to prior year tax positions	(758		)	(764		)
Increases related to current year tax positions	18,164			11,623
Settlements	—			—
Lapses in statute of limitations	(11,896		)	(8,873		)
Effects of foreign currency translation	(1,642		)	—
Balance at end of year	$	184,004		$	178,634

The entire amount of unrecognized tax benefits as of January 29, 2012, if recognized, would reduce the future effective tax rate under current accounting provisions.

Interest and penalties related to unrecognized tax benefits are recorded in the Company’s income tax provision. Interest and penalties recognized in the Company’s Consolidated Income Statements totaled an expense of $2,969 and $2,125 for 2011 and 2010, respectively. Interest and penalties accrued in the Company’s Consolidated Balance Sheets as of January 29, 2012 and January 30, 2011 totaled $10,577 and $7,608, respectively. The Company records its liabilities for unrecognized tax benefits principally in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets based on the anticipated timing of relieving such liabilities.

The Company files income tax returns in the United States and in various foreign, state and local jurisdictions. With few exceptions, examinations have been completed by tax authorities or the statute of limitations has expired for United States federal, foreign, state and local income tax returns filed by the Company for years through 2007. It is reasonably possible that a reduction in a range of $11,000 to $16,000 of uncertain tax positions may occur within 12 months of January 29, 2012.