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

			YEARS ENDED DECEMBER 31,
			2011		2010		2009

Current
	Federal		$	68,204	$	81,960	$	72,554
	State			8,911		(299)		4,882
	Foreign			7,903		5,659		2,704
				85,018		87,320		80,140
Deferred
	Federal			(9,033)		10,455		(8,509)
	State			(362)		1,444		(479)
	Foreign			578		(578)		-
				(8,817)		11,321		(8,988)

		Total	$	76,201	$	98,641	$	71,152

During 2011, 2010 and 2009, “Additional paid-in-capital” within stockholders' equity was increased/(decreased) by $2.2 million, $(0.8) million and $(0.9) million, respectively, as a result of tax windfalls/(shortfalls) related to the vesting of restricted stock and exercise of employee stock options.

The reconciliations of the U.S. federal statutory rate to the combined effective tax rate used to determine income tax expense (benefit) are as follows:

	YEARS ENDED DECEMBER 31,
	2011		2010		2009

Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State tax rate, net of federal benefit	0.5		0.5		0.9
Share-based payments	0.6		0.5		0.6
Foreign taxes	2.2		1.5		1.0
Tax contingencies reserve	2.8		(0.4)		-
Taxable gain in excess of book gain on
sale of subsidiary	-		-		4.8
Other non-deductible items	0.3		0.3		0.5
Credits and other	(0.9)		(0.2)		(0.5)
Valuation allowance	1.1		2.4		0.6
	41.6	%	39.6	%	42.9	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows (amounts in thousands):

		DECEMBER 31,
		2011				2010
		Current		Long-term		Current		Long-term

Deferred tax assets:
Net operating loss carryforwards		$	-	$	-	$	-	$	-
Reserves and liabilities			84,628		14,194		70,919		1,683
Investments			-		15,579		-		13,964
Contingent payments on sale of
	LipoSonix to Solta		-		10,494		-		-
Unrealized losses on securities			(81)		1,807		(458)		2,547
Excess of tax basis over net
	book value of intangible assets		-		78,601		-		72,560
Share-based payment awards			-		14,567		-		16,545
Credits and other			1,380		-		-		469
Capital loss carryover			-		1,590		-		-
			85,927		136,832		70,461		107,768
Deferred tax liabilities:
Unrealized gains on securities			-		-		-		-
Bond interest			(62,544)		-		-		(53,324)
Depreciation on property and equipment			-		(5,297)		-		(3,941)
			(62,544)		(5,297)		-		(57,265)

Valuation allowance			(10,663)		(16,980)		(5,379)		(8,226)

Net deferred tax assets		$	12,720	$	114,555	$	65,082	$	42,277

On June 10, 2009, the Company sold all of the outstanding capital stock of Medicis Pediatrics (see Note 7). The transaction generated a $24.8 million net gain for income tax purposes and, accordingly, a $9.0 million income tax provision was established as part of the transaction.

On November 1, 2011, the Company closed its sale of all issued and outstanding shares of common stock of LipoSonix to Solta. The transaction resulted in a $30.5 million capital loss for income tax purposes, of which $26.2 million can be carried back and used to offset capital gains generated in prior tax years. Accordingly, an income tax benefit of $9.4 million was recognized and is included in the gain from discontinued operations for the year ended December 31, 2011. A deferred tax asset was recorded on the portion of the capital loss ($4.3 million) that could not be carried back to prior years. As a capital loss can only be utilized to offset capital gains, the Company has recorded a valuation allowance of $1.5 million against the deferred tax asset in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

The sales price used to calculate the above capital loss consisted of $15.5 million of cash received at closing, $20.0 million of cash received on November 18, 2011 and $29.3 million of value from future additional contingent cash and milestone payments (see Note 3 for additional discussion). A deferred tax asset was recorded on the $29.3 million as it was not recognized as additional selling price for financial reporting purposes. The Company has recorded a valuation allowance of $10.5 million against this deferred tax asset in order to reduce the carrying value of this deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

At December 31, 2011 and 2010, the Company has an unrealized tax loss of $21.0 million related to the Company's option to acquire Revance or license Revance's topical product that is under development. The Company will not be able to determine the character of the loss until the Company exercises or fails to exercise its option. A realized loss characterized as a capital loss can only be utilized to offset capital gains. At December 31, 2011 and 2010, the Company has recorded a valuation allowance of $7.6 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

At December 31, 2011, the Company has an unrealized tax loss of $21.9 million related to the Company's option to acquire a privately-held U.S. biotechnology company. If the Company fails to exercise its option, a capital loss will be recognized. A loss characterized as a capital loss can only be used to offset capital gains. At December 31, 2011, the Company has recorded a valuation allowance of $7.9 million against the deferred tax asset associated with this unrealized tax loss in order to reduce the carrying value of the deferred tax asset to $0, which is the amount that management believes is more likely than not to be realized.

The Company recorded a deferred tax asset of approximately $1.7 million, $2.1 million and $2.9 million related to unrealized losses on available-for-sale securities in 2011, 2010 and 2009, respectively. All amounts have been presented as a component of other comprehensive income in stockholders' equity.

During 2011, 2010 and 2009, the Company made net tax payments of $59.9 million, $81.1 million and $44.6 million, respectively.

The Company operates in multiple tax jurisdictions and is periodically subject to audit in these jurisdictions. These audits can involve complex issues that may require an extended period of time to resolve and may cover multiple years. The Company and its domestic subsidiaries file a consolidated U.S. federal income tax return. Such returns have either been audited or settled through statute expiration through 2007. The state of California conducted an examination of the Company's tax returns for the periods ending June 30, 2005, December 31, 2005, December 31, 2006 and December 31, 2007. During the three months ended March 31, 2011, the Company reached a settlement for all periods with the state of California and paid approximately $0.5 million. In addition, the state of California is currently conducting an examination of the Company's tax returns for the periods ending December 31, 2008 and December 31, 2009.

The Company owns two subsidiaries that file corporate tax returns in Sweden. The Swedish tax authorities examined the tax return of one of the subsidiaries for fiscal 2004. The examiners issued a no change letter, and the examination is complete. The Company's other subsidiary in Sweden has not been examined by the Swedish tax authorities. The Swedish statute of limitations may be open for up to five years from the date the tax return was filed. Thus, all returns filed for periods ending December 31, 2006 forward are open under the statute of limitations.

A reconciliation of the 2011, 2010 and 2009 beginning and ending amount of unrecognized tax benefits is as follows (amounts in thousands):

	2011		2010		2009

Balance at beginning of period	$	1,357	$	2,599	$	2,512
Additions based on tax positions related to the current year		7,786		87		118
Additions for tax positions of prior years		-		-		1,352
Reductions for tax positions of prior years		(149)		(200)		-
Settlements		(381)		(296)		-
Reductions due to lapse in statute of limitations		-		(833)		(1,383)
Balance at end of period	$	8,613	$	1,357	$	2,599

The amount of unrecognized tax benefits which, if ultimately recognized, could favorably affect the effective tax rate in a future period is $5.6 million, $0.9 million and $1.7 million as of December 31, 2011, 2010 and 2009, respectively. The Company estimates that it is reasonably possible that the amount of unrecognized tax benefits will decrease by $0.3 million in the next twelve months due to audit settlements.

The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2011, 2010 and 2009, the Company did not recognize a material amount in interest and penalties. The Company had approximately $0.3 million and $0.5 million, respectively, for the payment of interest and penalties accrued (net of tax benefit) at December 31, 2011 and 2010.