INCOME TAXES

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



	2013		2012		2011
Domestic	$	98,772	$	229,080	$	127,393
Foreign	229,994		314,032		235,692
Total	$	328,766	$	543,112	$	363,085

Taxes paid were $45,813, $55,502 and $71,873 in 2013, 2012 and 2011.

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



	2013			2012		2011
Federal:
Current	$	116,950		$	18,743	$	18,053
Deferred	(29,331		)	35,766		17,880
State and local:
Current	5,848			4,716		9,128
Deferred	(5,164		)	6,305		(2,802		)
Foreign:
Current	124,664			35,826		45,324
Deferred	(27,683		)	7,916		(195		)
Total	$	185,284		$	109,272	$	87,388

The Company’s provision for income taxes for the years 2013, 2012 and 2011 was different from the amount computed by applying the statutory United States federal income tax rates to the underlying income as follows:



	2013		2012		2011
Statutory federal tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal income tax benefit	(3.0	)%	1.2	%	0.8	%
Effects of international jurisdictions, including foreign tax credits	(23.9	)%	(14.3	)%	(10.9	)%
Nondeductible professional fees in connection with acquisitions	—	%	1.0	%	—	%
Change in estimates for uncertain tax positions	44.3	%	0.7	%	(0.3	)%
Previously unrecognized tax credits	—	%	(1.0	)%	—	%
Decreases in international income tax rates	—	%	—	%	(1.4	)%
Change in valuation allowance	5.8	%	(1.6	)%	(1.6	)%
Other, net	(1.8	)%	(0.9	)%	2.5	%
Effective tax rate	56.4	%	20.1	%	24.1	%

In 2013, the Company recorded $145,525 of tax expense, which increased the 2013 effective tax rate by 44.3% and is displayed in the above table as change in estimates for uncertain tax positions. The majority of this expense relates to an increase to the Company’s previously established liability for an uncertain tax position related to European and United States transfer pricing arrangements. Such liabilities are expected to continue to be adjusted as facts and circumstances change. Also in 2013, the Company recorded expense of $19,227, which increased the 2013 effective tax rate by 5.8%. The majority of this expense relates to valuation allowances recorded on deferred tax assets from the Company’s business in Japan, as well as certain domestic state and local deferred tax assets.

Effects of international jurisdictions, including foreign tax credits, reflected in the above table for 2013, 2012 and 2011 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 2023.

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



	2013			2012
Gross deferred tax assets
Tax loss and credit carryforwards	$	282,888		$	95,665
Employee compensation and benefits	82,414			102,105
Inventories	18,047			13,765
Accounts receivable	26,698			12,751
Accrued expenses	38,051			22,844
Other, net	40,194			8,022
Subtotal	488,292			255,152
Valuation allowances	(43,553		)	(9,945		)
Total gross deferred tax assets, net of valuation allowances	$	444,739		$	245,207
Gross deferred tax liabilities
Intangibles	$	(1,197,118	)	$	(712,496	)
Property, plant and equipment	(75,113		)	(22,732		)
Total gross deferred tax liabilities	$	(1,272,231	)	$	(735,228	)
Net deferred tax liability	$	(827,492	)	$	(490,021	)

At the end of 2013, the Company had federal net operating loss carryforwards of approximately $3,926, tax effected state tax loss carryforwards of approximately $37,984, which at current apportionment percentages would equate to approximately $1,404,744 of income (which is subject to change based upon future apportionment percentages), foreign net operating loss carryforwards of $451,085 and federal, state and local carryforwards of $183,610. The carryforwards expire principally between 2014 and 2033. The valuation allowance increase relates primarily to tax attributes (e.g., state, 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 be realized.

The Company does not provide for deferred taxes on the excess of financial reporting over tax basis on its investments in all of its foreign subsidiaries that are essentially permanent in duration. The earnings that are permanently reinvested were $1,723,499 as of February 2, 2014. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation.

Uncertain tax positions activity for each of the last two years was as follows:



	2013			2012
Balance at beginning of year	$	197,964		$	184,004
Increase due to assumed Warnaco positions	142,778			—
Increases related to prior year tax positions	123,396			3,775
Decreases related to prior year tax positions	(3,194		)	(2,747		)
Increases related to current year tax positions	64,059			22,114
Lapses in statute of limitations	(38,290		)	(10,939		)
Effects of foreign currency translation	(1,004		)	1,757
Balance at end of year	$	485,709		$	197,964

The entire amount of uncertain tax positions as of February 2, 2014, if recognized, would reduce the future effective tax rate under current accounting provisions.

Interest and penalties related to uncertain tax positions are recorded in the Company’s income tax provision. Interest and penalties recognized in the Company’s Consolidated Income Statements totaled an expense of $15,306 and $3,420 for 2013 and 2012, respectively. Interest and penalties accrued in the Company’s Consolidated Balance Sheets as of February 2, 2014 and February 3, 2013 totaled $67,853 and $13,997, respectively. The Company records its liabilities for uncertain tax positions 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 2005. It is reasonably possible that a reduction of uncertain tax positions in a range of $70,000 to $100,000 may occur within 12 months of February 2, 2014.