Note 9. Income Taxes

Reliance and its subsidiaries file numerous consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. We are no longer subject to U.S. federal, state and local tax examinations for years before 2006.

Significant components of the provision for income taxes attributable to operations are as follows:

	Year Ended December 31,

	2012			2011			2010
	(in millions)
Current:
Federal	$	159.1		$	153.1		$	40.3
State		26.5			22.1			12.2
Foreign		12.7			14.4			3.4

		198.3			189.6			55.9
Deferred:
Federal		2.5			(24.1	)		34.0
State		0.5			(2.3	)		7.9
Foreign		(0.2	)		(0.8	)		0.8

		2.8			(27.2	)		42.7

	$	201.1		$	162.4		$	98.6

Components of U.S. and international income before income taxes were as follows:

	Year Ended December 31,

	2012		2011		2010
	(in millions)
U.S.	$	551.6	$	452.0	$	275.8
International		57.8		59.6		20.7

Income before income taxes	$	609.4	$	511.6	$	296.5

The reconciliation of income tax at the U.S. federal statutory tax rates to income tax expense is as follows:

	Year Ended December 31,

	2012			2011			2010
Income tax at U.S. federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income tax, net of federal tax effect		2.9			2.4			3.9
Net effect of life insurance policies		(2.2	)		(2.3	)		(2.6	)
Net effect of changes in unrecognized tax benefits		—			—			(0.1	)
Domestic production activity deduction		(1.2	)		(1.5	)		(1.2	)
Other, net		(1.5	)		(1.9	)		(1.7	)

Effective tax rate		33.0	%		31.7	%		33.3	%

Significant components of our deferred tax assets and liabilities are as follows:

	December 31,

	2012			2011
	(in millions)
Deferred tax assets:
Accrued expenses not currently deductible for tax	$	66.9		$	45.7
Inventory costs capitalized for tax purposes		25.8			24.7
Share-based compensation		21.1			20.2
Allowance for doubtful accounts		7.8			9.3
Tax credits carryforwards		1.1			1.1
Net operating loss carryforwards		3.4			3.1
Other		3.5			3.9

Total deferred tax assets		129.6			108.0
Deferred tax liabilities:
Property, plant and equipment, net		(165.9	)		(154.1	)
Goodwill and other intangible assets		(360.9	)		(342.9	)
LIFO inventories		(38.6	)		(17.5	)

Total deferred tax liabilities		(565.4	)		(514.5	)

Net deferred tax liabilities	$	(435.8	)	$	(406.5	)

As of December 31, 2012, we had available state net operating loss carryforwards ("NOL") of $4.9 million to offset future income taxes, expiring in years 2013 through 2032. We believe that it is more likely than not that we will be able to realize these NOL's within their respective carryforward periods.

Taxes on Foreign Income

As of December 31, 2012, unremitted earnings of subsidiaries outside of the United States were approximately $186.7 million on which no United States taxes had been provided. Our intention is to indefinitely reinvest these earnings outside the United States. It is not practicable to estimate the amount of additional taxes that might be payable upon repatriation of foreign earnings.

Unrecognized Tax Benefits

We are under audit by various state jurisdictions but do not anticipate any material adjustments from these examinations. Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

	Year Ended December 31,

	2012			2011			2010
	(in millions)
Unrecognized tax benefits at January 1	$	16.1		$	15.4		$	15.5
Increases in tax positions for prior years		0.6			1.3			0.3
Decreases in tax positions for prior years		—			(0.2	)		(0.9	)
Increases in tax positions for current year		4.1			3.7			3.0
Settlements		(1.1	)		(0.1	)		(0.3	)
Lapses in statutes-of-limitation periods		(3.8	)		(4.0	)		(2.2	)

Unrecognized tax benefits at December 31	$	15.9		$	16.1		$	15.4

As of December 31, 2012, $15.9 million of unrecognized tax benefits would impact the effective tax rate if recognized. Accrued interest and penalties, net of applicable tax effect, related to uncertain tax positions were approximately $0.9 million and $1.1 million as of December 31, 2012 and 2011, respectively.