11. INCOME TAXES

The domestic (Singapore) and foreign components of income before income taxes were comprised of the following:


		Fiscal Ye ar Ende d March 31,
		2012		2011		2010
			(In thousands)
Domestic	$	186,855	$	231,209	$	86,411
Foreign		377,906		397,312		(97,157	)
Total	$	564,761	$	628,521	$	(10,746	)

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


		Fiscal Ye ar Ende d March 31,
		2012			2011			2010
				(In thousands)
Current:
Domestic	$	303		$	(972	)	$	50
Foreign		56,256			26,798			(18,908	)
		56,559			25,826			(18,858	)
Deferred:
Domestic		386			(319	)		1,077
Foreign		(2,829	)		(3,331	)		(17,967	)
		(2,443	)		(3,650	)		(16,890	)
Provision for (benefit from) income taxes	$	54,116		$	22,176		$	(35,748	)

The domestic statutory income tax rate was approximately 17.0% in fiscal years 2012, 2011 and 2010.The reconciliation of the income tax expense (benefit) expected based on domestic statutory income tax rates to the expense (benefit) for income taxes included in the consolidated statements of operations is as follows:


		Fiscal Year Ended March 31,
		2012			2011			2010
				(In thousands)
Income taxes based on domestic statutory rates	$	96,014		$	106,852		$	(1,852	)
Effect of tax rate differential		(177,540	)		26,459			(42,106	)
Intangible amortization		9,502			12,055			15,279
Change in liability for uncertain tax positions		34,517			(29,205	)		(80,175	)
Change in valuation allowance		93,336			(90,033	)		69,076
Other		(1,713	)		(3,952	)		4,030
Provision for income taxes	$	54,116		$	22,176		$	(35,748	)

A number of countries in which the Company is located allow for tax holidays or provide other tax incentives to attract and retain business. In general, these holidays were secured based on the nature, size and location of the Company's operations. The aggregate dollar effect on the Company's income resulting from tax holidays and tax incentives to attract and retain business for the fiscal years ended March 31, 2012, 2011 and 2010 were $41.8 million, $66.5 million and $65.4 million, respectively. For the fiscal year ended March 31, 2012, the effect on basic and diluted earnings per share was $0.06 and $0.06, respectively, and the effect on basic and diluted earnings per share during fiscal years 2011 and 2010 were $0.09 and $0.08, and $0.08 and $0.08, respectively. Unless extended or otherwise renegotiated, the Company's existing holidays will expire in the fiscal years ending March 31, 2013 through fiscal 2018.

Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to Singapore. The Company has included the effects of Singapore's territorial tax system in the rate differential line above. The tax effect of foreign income not repatriated to Singapore for the fiscal years ended March 31, 2012, 2011 and 2010 were $17.7 million, $32.6 million and $20.0 million, respectively.

The components of deferred income taxes are as follows:


		As of March 31,
		2012			2011
		(In thousands)
Deferred tax liabilities:
Fixed assets	$	(30,159	)	$	(28,695	)
Others		(30,032	)		(229,891	)
Total deferred tax liabilities		(60,191	)		(258,586	)
Deferred tax assets:
Fixed assets		73,588			86,055
Intangible assets		178,910			238,254
Deferred compensation		11,088			10,821
Inventory valuation		12,265			17,376
Provision for doubtful accounts		3,340			7,994
Net operating loss and other carryforwards		2,753,940			2,739,795
Others		176,547			201,357
		3,209,678			3,301,652
Valuation allowances		(3,099,561	)		(2,994,186	)
Deferred tax assets, net of valuation allowance		110,117			307,466
Net deferred tax asset	$	49,926		$	48,880
The net deferred tax asset is classified as follows:
Current asset (classified as other current assets)	$	815		$	936
Long-term asset		49,111			47,944
Total	$	49,926		$	48,880

The Company has tax loss carryforwards of approximately $8.4 billion, a portion of which started expiring during 2013. Utilization of the tax loss carryforwards and other deferred tax assets is limited by the future earnings of the Company in the tax jurisdictions in which such deferred assets arose. As a result, management is uncertain as to when or whether these operations will generate sufficient profit to realize any benefit from the deferred tax assets. The valuation allowance provides a reserve against deferred tax assets that are not more likely than not to be realized by the Company. However, management has determined that it is more likely than not that the Company will realize certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The change in valuation allowance is net of certain increases and decreases to prior year losses and other carryforwards that have no current impact on the tax provision. Approximately $34.0 million of the valuation allowance relates to income tax benefits arising from the exercise of stock options, which if realized will be credited directly to shareholders' equity and will not be available to benefit the income tax provision in any future period.

The amount of deferred tax assets considered realizable, however, could be reduced or increased in the near-term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries, differ from management's estimates.

The Company does not provide for income taxes on approximately $570.0 million of undistributed earnings of its foreign subsidiaries as of March 31, 2012, as such earnings are not intended by management to be repatriated in the foreseeable future. Determination of the amount of the unrecognized deferred tax liability on these undistributed earnings is not practicable.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


		Fiscal Year Ended March 31,
		2012			2011
		(In thousands)
Balance, beginning of fiscal year	$	134,627		$	129,888
Additions based on tax position related to the current year		25,113			12,443
Additions for tax positions of prior years		25,719			25,572
Reductions for tax positions of prior years		(18,257	)		(35,090	)
Reductions related to lapse of applicable statute of limitations		(788	)		(2,342	)
Settlements		(1,386	)		(1,187	)
Other		1,404			5,343
Balance, end of fiscal year	$	166,432		$	134,627

The Company's unrecognized tax benefits are subject to change over the next twelve months primarily as a result of the expiration of certain statutes of limitations and as audits are settled. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an estimated range of $26.0 - $32.0 million within the next twelve months primarily due to potential settlements of various audits and the expiration of certain statutes of limitations.

The Company and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2000.

The entire amount of unrecognized tax benefits at March 31, 2012, may affect the annual effective tax rate if the benefits are eventually recognized.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the Company's tax expense. During the fiscal years ended March 31, 2012 and 2011, the Company recognized interest of approximately $5.4 million and $5.0 million, respectively, and no penalties. The Company had approximately $10.6 million and $5.5 million accrued for the payment of interest as of the fiscal years ended March 31, 2012 and 2011, respectively. The Company has not accrued for the payment of penalties for the fiscal years ended March 31, 2012 and 2011, respectively.

As of March 31, 2011, approximately $230.1 million of deferred tax liabilities were previously offset against deferred tax assets in the "components of deferred income taxes" disclosure within this footnote, whereas they should have been reflected on a gross basis. These amounts have been corrected, resulting in an increase in other deferred tax liabilities of $230.1 million, and increases to the deferred tax assets related to "fixed assets" and "other" of $28.7 million and $201.4 million, respectively. In addition, for the year ended March 31, 2011, approximately $248.3 million of domestic income was previously included as foreign income in the "components of income before income taxes" disclosure within this footnote, due to the nonaccrual of certain intercompany amounts and should have been included as domestic income. These amounts have been corrected, resulting in an increase in domestic income, and a corresponding decrease in foreign income, of approximately $248.3 million from amounts previously reported. The correction of the above items had no impact on net income, the provision for income taxes, net deferred tax assets, or any other amounts in the accompanying consolidated financial statements as of and for the year ended March 31, 2011.