INCOME TAXES

The domestic and foreign components of income before provision for income taxes were as follows (in thousands):



	For the Year Ended December 31,
	2012		2011		2010
Domestic	$	90,240	$	128,201	$	161,969
Foreign	37,490		56,477		26,388
Total	$	127,730	$	184,678	$	188,357

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



	For the Year Ended December 31,
	2012			2011			2010
Current:
Federal (i)	$	(29,401	)	$	16,285		$	48,974
State	(10,736		)	6,002			10,397
Foreign	4,030			(2,697		)	(5,687		)
	(36,107		)	19,590			53,684
Deferred
Federal	23,521			22,455			1,207
State	2,865			2,710			(647		)
Foreign	7,777			12,671			3,598
	34,163			37,836			4,158
Net (benefit) provision for income taxes	$	(1,944	)	$	57,426		$	57,842

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(i)	The 2012 benefit includes decrease in unrecognized tax benefits of $52.4 million (net of interest and penalties of $29.3 million) resulting from expiring statute of limitation periods related to an historical Canadian debt restructuring transaction.

The Company's effective tax rate (including taxes on income from discontinued operations in 2010) for fiscal years 2012, 2011 and 2010 was (2) percent, 31 percent and 31 percent, respectively. The effective income tax rate varied from the amount computed using the statutory federal income tax rate as follows (in thousands):



	For the Year Ended December 31,
	2012			2011			2010
Tax expense at statutory rate	$	44,705		$	64,637		$	65,925
State income taxes, net of federal benefit	3,526			5,788			6,966
Foreign rate differential	(8,607		)	(10,229		)	(6,752		)
Non-deductible transaction costs	2,229			416			—
Uncertain tax position releases	(52,424		)	(6,156		)	(14,282		)
Uncertain tax position interest and penalties	1,658			2,240			2,636
Other	6,969			730			3,349
Net (benefit) provision for income taxes	$	(1,944	)	$	57,426		$	57,842

The components of the total net deferred tax assets and liabilities at December 31, 2012 and 2011 were as follows (in thousands):



	2012			2011
Deferred tax assets:
Workers compensation accrual	$	4,961		$	5,011
Provision for doubtful accounts	7,451			4,803
Closure, post-closure and remedial liabilities	52,382			31,082
Accrued expenses	20,102			13,635
Accrued compensation	5,000			2,279
Net operating loss carryforwards(1)	92,623			23,663
Tax credit carryforwards(2)	31,939			19,977
Uncertain tax positions accrued interest and federal benefit	350			11,462
Stock-based compensation	844			1,884
Other	1,121			4,421
Total deferred tax assets	216,773			118,217
Deferred tax liabilities:
Property, plant and equipment	(220,086		)	(114,115		)
Permits and other intangible assets	(155,214		)	(20,547		)
Total deferred tax liabilities	(375,300		)	(134,662		)
Total net deferred tax liability before valuation allowance	(158,527		)	(16,445		)
Less valuation allowance	(25,635		)	(11,473		)
Net deferred tax liabilities	$	(184,162	)	$	(27,918	)

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(1)	As of December 31, 2012, the net operating loss carryforwards included (i) state net operating loss carryovers of $150.1 million which begin to expire in 2019, (ii) federal net operating loss carryforwards of $212.1 million which begin to expire in 2025, and (iii) foreign net operating loss carryforwards of $53.9 million which begin to expire in 2026.


(2)	As of December 31, 2012, foreign tax credit carryforwards of $31.9 million expire between 2013 and 2022 as follows:



Years Ending December 31,	Expected Amount
2013	$	4,656
2014	3,603
2015	889
2016	1,164
2017	1,192
Thereafter	20,435
	$	31,939

During 2012, the Company decreased taxes payable for adjustments related to realized and recognized tax benefits of $8.5 million related to exercises of non-qualified stock options and the vesting of restricted stock of which $5.9 million resulted in an increase to additional paid-in capital.

The Company does not accrue U.S. tax for foreign earnings that it considers to be permanently reinvested outside the United States. Consequently, the Company has not provided any U.S. tax on the unremitted earnings of its foreign subsidiaries. As of December 31, 2012 and 2011, the amount of earnings for which no repatriation tax has been provided was $143.4 million and $105.4 million, respectively. It is not practicable to estimate the amount of additional tax that might be payable on those earnings if repatriated.

A valuation allowance is required to be established when, based on an evaluation of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, as of December 31, 2012, 2011 and 2010, the Company had a valuation allowance of $25.6 million, $11.5 million and $12.9 million, respectively. The Safety-Kleen acquisition accounted for $12.5 million of the increase in the valuation allowance, which consisted of $7.8 million of foreign tax credits and $4.7 million of foreign net operating loss carryforwards. The total allowance as of December 31, 2012 consisted of $17.6 million of foreign tax credits, $1.4 million of state net operating loss carryforwards and $6.6 million of foreign net operating loss carryforwards and credits. The allowance as of December 31, 2011 consisted of $10.2 million of foreign tax credits, $1.1 million of state net operating loss carryforwards and $0.2 million of foreign net operating loss carryforwards. The allowance as of December 31, 2010 consisted of $11.3 million of foreign tax credits, $1.4 million of state net operating loss carryforwards and $0.2 million of foreign net operating loss carryforwards.

Included in the balance of liabilities for uncertain tax positions at December 31, 2012 and 2011 was $4.9 million and $63.0 million, respectively, of unrecognized tax benefits (including interest and penalties) that, if recognized, would affect the annual effective income tax rate.

The Company's policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. The liability for unrecognized tax benefits at December 31, 2012 included accrued interest of $1.4 million. Interest expense that is recorded as a tax expense against the liability for unrecognized tax benefits for the years ended December 31, 2012, 2011 and 2010 included interest and penalties of $2.8 million, $3.4 million and $4.1 million, respectively.

The changes to unrecognized tax benefits (excluding related penalties and interest) from January 1, 2010 through December 31, 2012, were as follows (in thousands):



	2012			2011			2010			Description
Unrecognized tax benefits as of January 1	$	36,217		$	39,709		$	48,178
Gross adjustments in tax positions	—			(302		)	498			Additional Canadian liabilities
Gross increases due to current year acquisitions	2,652			376			—			Additional U.S. and Canadian liabilities
Settlements	—			(75		)	—			Required payments
Expiration of statute of limitations	(35,328		)	(3,436		)	(8,929		)	U.S. and Canadian
Foreign currency translation	2			(55		)	(38		)	Currency translation adjustment
Unrecognized tax benefits as of December 31	$	3,543		$	36,217		$	39,709

Total unrecognized tax benefits, other than adjustments for additional accruals for interest and penalties and foreign currency translation, decreased by approximately $52.4 million. The $52.4 million (net of interest and penalties of $29.3 million) was recorded in earnings and therefore impacted the effective income tax rate. Approximately $52.1 million was due to expiring statute of limitation periods related to a historical Canadian debt restructuring transaction and $0.3 million was related to the conclusion of examinations with state taxing authorities and the expiration of various state statute of limitation periods.

As of December 31, 2012, the Company had recorded $3.5 million of liabilities for unrecognized tax benefits and $1.4 million related to interest. As of December 31, 2011, the Company had recorded $36.2 million of liabilities for unrecognized tax benefits and $26.8 million related to interest and penalties.

The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service (the "IRS") for calendar years 2009 through 2012. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. The Company may also be subject to examinations by state and local revenue authorities for calendar years 2005 through 2012. The Company is currently not under examination by the IRS. The Company has ongoing U.S. state and local jurisdictional audits, as well as Canadian federal and provincial audits, all of which the Company believes will not result in material liabilities.

Due to expiring statute of limitation periods and the resolution of tax audits, the Company believes that total unrecognized tax benefits, will decrease by approximately $4.1 million within the next 12 months. The $4.1 million (which includes interest and penalties of $1.3 million) is related to various federal, state and foreign tax laws and will be recorded in earnings and therefore will impact the effective income tax rate, net of tax benefits.