INCOME TAXES

At December 31, 2012, the Company had cumulative net operating loss carryforwards (“NOL CFs”) for federal income tax purposes of approximately $93.4 million, which begin to expire in 2024 if not utilized before then. The deferred tax asset balance includes $1.1 million net of a $0.2 million valuation allowance related to state NOL CFs, which have remaining lives ranging from one to twenty years. During the second quarter of 2008, ABX recorded a valuation allowance against these state NOLs for potential changes in DHL's network operations. These NOL CFs are attributable to excess tax deductions related primarily to the accelerated tax depreciation of fixed assets.

The significant components of the deferred income tax assets and liabilities as of December 31, 2012 and 2011 are as follows (in thousands):



	December 31
	2012			2011
Deferred tax assets:
Net operating loss carryforward and federal credits	$	34,401		$	35,814
Capital and operating leases	1,742			763
Post-retirement employee benefits	62,823			65,695
Employee benefits other than post-retirement	18,010			17,324
Inventory reserve	3,181			3,172
Deferred revenue	10,770			9,624
Other	458			221
Deferred tax assets	131,385			132,613
Deferred tax liabilities:
Accelerated depreciation	(147,282		)	(130,180		)
Partnership items	(9,418		)	(12,384		)
State taxes	(1,724		)	(802		)
Valuation allowance against deferred tax assets	(229		)	(229		)
Deferred tax liabilities	(158,653		)	(143,595		)
Net deferred tax (liability)	$	(27,268	)	$	(10,982	)

The following summarizes the Company’s income tax provisions (benefits) (in thousands):



	Years Ended December 31
	2012			2011			2010
Current taxes:
Federal	$	—		$	(950	)	$	1,275
Foreign	337			—			—
State	145			426			1,278
Deferred taxes:
Federal	23,454			15,968			20,452
Foreign	—			—			—
State	736			1,551			408
Total deferred tax expense	24,190			17,519			20,860
Total income tax expense from continuing operations	$	24,672		$	16,995		$	23,413
Income tax expense (benefit) from discontinued operations	$	(441	)	$	(393	)	$	(40	)
Income tax expense (benefit) for debt extinguishment	$	—		$	—		$	(14,847	)

The reconciliation of income tax from continuing operations computed at the U.S. statutory federal income tax rates to effective income tax rates is as follows:



	Years Ended December 31
	2012		2011		2010
Statutory federal tax rate	35.0	%	35.0	%	35.0	%
Foreign income taxes	0.3	%	—	%	—	%
State income taxes, net of federal tax benefit	0.9	%	3.1	%	1.7	%
Tax effect of non-deductible goodwill	—	%	2.4	%	—	%
Tax effect of other non-deductible expenses	1.1	%	1.7	%	0.9	%
Other	(0.1	)%	(0.6	)%	(0.6	)%
Effective income tax rate	37.2	%	41.6	%	37.0	%

The reconciliation of income tax from discontinued operations computed at the U.S. statutory federal income tax rates to effective income tax rates is as follows:



	Years Ended December 31
	2012		2011		2010
Statutory federal tax rate	(35.0	)%	(35.0	)%	(35.0	)%
State income taxes, net of federal tax benefit	(1.3	)%	(1.8	)%	(1.3	)%
Effective income tax rate	(36.3	)%	(36.8	)%	(36.3	)%

The Company files income tax returns in the U.S. federal jurisdiction and various international, state and local jurisdictions. The returns may be subject to audit by the Internal Revenue Service (“IRS”) and other jurisdictional authorities. International returns consist of disclosure returns where the Company is covered by the sourcing rules of U.S. international treaties. The Company recognizes the impact of an uncertain income tax position in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. During 2010, the statute of limitations expired on the remaining uncertain position items, accordingly, the Company reversed the remaining uncertain positions liability of $2.2 million, reduced tax expense by $0.4 million and restored the deferred tax asset by $1.7 million. Accrued interest and penalties on tax positions are recorded as a component of interest expense. Interest and penalties expense was immaterial for 2012, 2011 and 2010. Changes in unrecognized tax benefits are as follows (in thousands):



	2012		2011		2010
As of January 1	$	—	$	—	$	4,287
Expiration of uncertain tax positions	—		—		(4,287		)
As of December 31	$	—	$	—	$	—

The consolidated federal tax returns for the years 2003 through 2007 for ABX and the years 2001 through 2007 for CHI remain open to federal examination only to the extent of net operating loss carryforwards carried over from or utilized in those years. Effective in 2008, the Company began to file federal tax returns under the new common parent of the consolidated group that includes ABX, CHI and all the wholly-owned subsidiaries. All returns related to the current consolidated group remain open to examination with the exception of the 2008 Federal return. In 2010, the IRS concluded its examination of the 2008 federal return for the Company and issued a "no change" report in early 2011. State and local returns filed for 2005 through 2011 are generally also open to examination by their respective jurisdictions.