Income Taxes

Provision for income taxes for the years ended December 31 consists of the following (in thousands):



	2012			2011			2010
Current:
Federal	$	191,006		$	135,232		$	138,221
State	4,221			12,177			6,919
Foreign	13,189			5,776			4,486
	208,416			153,185			149,626
Deferred:
Federal	121,934			104,723			(18,428		)
State	7,697			(12,201		)	(1,361		)
Foreign	(460		)	(1,121		)	963
	129,171			91,401			(18,826		)
Total	$	337,587		$	244,586		$	130,800

The components of income before income taxes for the years ended December 31 were as follows (in thousands):



	2012		2011		2010
Domestic	$	946,592	$	782,896	$	377,416
Foreign	14,920		9,768		13,053
	$	961,512	$	792,664	$	390,469

The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate due to the following items for the years ended December 31:



	2012		2011		2010
Provision at statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	1.6		1.6		1.0
Domestic manufacturing deduction	(1.6	)	(1.8	)	(3.2	)
Research and development credit	—		(0.6	)	(1.0	)
Unrecognized tax benefits including interest and penalties	0.1		(1.1	)	(0.2	)
Valuation allowance adjustments	(0.3	)	(2.0	)	0.7
Medicare Part D	—		—		3.4
Tax audit settlements	(0.1	)	(1.1	)	(0.4	)
Investments in low-income housing partnerships	—		—		0.6
Adjustments for previously accrued taxes	(0.4	)	0.3		(2.8	)
Other	0.8		0.6		0.4
Provision for income taxes	35.1	%	30.9	%	33.5	%

The principal components of the Company’s deferred tax assets and liabilities as of December 31 include the following (in thousands):



	2012			2011
Deferred tax assets:
Accruals not yet tax deductible	$	118,434		$	123,514
Pension and postretirement benefit plan obligations	227,593			219,071
Stock compensation	28,001			32,486
Net operating loss carryforward	32,276			28,914
Valuation allowance	(16,314		)	(14,914		)
Other, net	45,053			49,253
	435,043			438,324
Deferred tax liabilities:
Depreciation, tax in excess of book	(117,743		)	(77,787		)
Other	(34,602		)	(25,767		)
	(152,345		)	(103,554		)
Total	$	282,698		$	334,770

The Company reviews its deferred tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with any positive or negative evidence such as tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

At December 31, 2012, the Company had approximately $420.8 million state net operating loss carry-forwards expiring in 2031. At December 31, 2012 the Company also had Wisconsin research and development credit carryforwards of $15.3 million expiring in 2026. The Company had a deferred tax asset of $31.8 million as of December 31, 2012 for the benefit of these losses and credits. A valuation allowance of $15.8 million has been established against the deferred tax asset.

At December 31, 2012, the Company had $1.4 million federal capital loss carryforwards expiring in 2013. The Company had a deferred tax asset of $0.5 million as of December 31, 2012 for the benefit of this loss. A valuation allowance of $0.5 million has been established against the deferred tax asset.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):



	2012			2011
Unrecognized tax benefits, beginning of period	$	57,137		$	69,805
Increase in unrecognized tax benefits for tax positions taken in a prior period	1,806			13,745
Decrease in unrecognized tax benefits for tax positions taken in a prior period	(6,439		)	(21,574		)
Increase in unrecognized tax benefits for tax positions taken in the current period	3,737			3,036
Statute lapses	(415		)	(2,249		)
Settlements with taxing authorities	(7,074		)	(5,626		)
Unrecognized tax benefits, end of period	$	48,752		$	57,137

The amount of unrecognized tax benefits as of December 31, 2012 that, if recognized, would affect the effective tax rate was $35.5 million.

The total gross amount of income related to interest and penalties associated with unrecognized tax benefits recognized during 2012 in the Company’s Consolidated Statements of Operations was $3.0 million due to favorable settlements and statute lapses.

The total gross amount of interest and penalties associated with unrecognized tax benefits recognized at December 31, 2012 in the Company’s Consolidated Balance Sheets was $20.6 million.

The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2013. However, the Company is under regular audit by tax authorities. The Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

The Company or one of its subsidiaries files income tax returns in the United States federal and Wisconsin state jurisdictions and various other state and foreign jurisdictions. The Company is no longer subject to income tax examinations for Wisconsin state income taxes before 2009 or for United States federal income taxes before 2009.