NOTE 9 Income Taxes

Significant components of the provision (benefit) for income taxes for the years ended December 31 are as follows:


(in thousands)	2011		2010		2009
Current:
Federal	$	65,461	$	70,715	$	62,547
State		10,084		10,236		10,730
Foreign		638		860		286

Total current provision		76,183		81,811		73,563

Deferred:
Federal		27,212		19,890		24,913
State		3,131		2,645		2,984

Total deferred provision		30,343		22,535		27,897

Total tax provision	$	106,526	$	104,346	$	101,460

A reconciliation of the differences between the effective tax rate and the federal statutory tax rate for the years ended December 31 is as follows:

		$106,526			$106,526			$106,526
	2011			2010			2009
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		3.5			3.5			4.0
Non-deductible employee stock purchase plan expense		0.3			0.3			0.4
Non-deductible meals and entertainment		0.3			0.3			0.3
Interest exempt from taxation and dividend exclusion		—			—			(0.1	)
Other, net		0.3			0.1			0.2

Effective tax rate		39.4	%		39.2	%		39.8	%

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 corresponding amounts used for income tax reporting purposes.

Significant components of Brown & Brown's current deferred tax assets as of December 31 are as follows:


(in thousands)	2011		2010
Current deferred tax assets:
Deferred profit-sharing contingent commissions	$	11,124	$	12,274
Accruals and reserves		8,739		7,802

Total current deferred tax assets	$	19,863	$	20,076

Significant components of Brown & Brown's non-current deferred tax liabilities and assets as of December 31 are as follows:


(in thousands)	2011			2010
Non-current deferred tax liabilities:
Fixed assets	$	11,400		$	9,263
Net unrealized holding gain of available-for-sale securities		4			4
Prepaid insurance and pension		3,123			28
Intangible assets		176,459			146,815

Total non-current deferred tax liabilities		190,986			156,110

Non-current deferred tax assets:
Deferred compensation		11,341			8,232
Accruals and reserves		—			—
Net operating loss carryforwards		2,071			1,721
Valuation allowance for deferred tax assets		(478	)		(325	)

Total non-current deferred tax assets		12,934			9,628

Net non-current deferred tax liability	$	178,052		$	146,482

Income taxes paid in 2011, 2010 and 2009 were $75,403,000, $69,828,000, and $76,373,000, respectively.

At December 31, 2011, Brown & Brown had net operating loss carryforwards of $295,000 and $40,915,000 for federal and state income tax reporting purposes, respectively, portions of which expire in the years 2012 through 2031. The federal carryforward is derived from insurance operations acquired by Brown & Brown in 2001. The state carryforward is derived from the operating results of certain subsidiaries.

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


(in thousands)	2011			2010			2009
Unrecognized tax benefits balance at January 1	$	656		$	635		$	611
Gross increases for tax positions of prior years		257			229			489
Gross decreases for tax positions of prior years		—			—			(274	)
Settlements		(107	)		(208	)		(182	)
Lapse of statute of limitations		—			—			(9	)

Unrecognized tax benefits balance at December 31	$	806		$	656		$	635

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2011 and 2010, we had approximately $188,000 and $140,000 of accrued interest related to uncertain tax positions, respectively.

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $806,000 as of December 31, 2011 and $656,000 as of December 31, 2010. We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

As a result of a 2006 Internal Revenue Service ("IRS") audit, we agreed to accrue at each December 31, for tax purposes only, a known amount of profit-sharing contingent commissions represented by the actual amount of profit-sharing contingent commissions received in the first quarter of the related year, with a true-up adjustment to the actual amount received by the end of the following March 31. Since this method for tax purposes differs from the method used for book purposes, it will result in a current deferred tax asset as of December 31 each year with that balance reversing by the following March 31 when the related profit-sharing contingent commissions are recognized for financial accounting purposes.

The Company is subject to taxation in the United States and various state jurisdictions. The Company is also subject to taxation in the United Kingdom. In the United States, federal returns for fiscal years 2008 through 2011 remain open and subject to examination by the Internal Revenue Service. The Company files and remits state income taxes in various states where the Company has determined it is required to file state income taxes. The Company's filings with those states remain open for audit for the fiscal years 2007 through 2011. In the United Kingdom, the Company's filings remain open for audit for the fiscal years 2008 through 2011. The Company currently has no ongoing federal, state or foreign income tax audits.