8. Income Taxes

The components of income before income taxes are as follows:


	Fiscal Year Ended January 31,
	2012		2011		2010
Domestic	$	261,214	$	374,777	$	333,824
Foreign		27,617		42,431		10,582

	$	288,831	$	417,208	$	344,406

The components of the provision for income tax expense are as follows:


	Fiscal Year Ended January 31,
	2012			2011			2010
Current:
Federal	$	93,244		$	127,390		$	107,350
State		14,199			19,492			13,216
Foreign		8,287			6,095			1,786

		115,730			152,977			122,352

Deferred:
Federal		(11,292	)		(6,698	)		2,960
State		124			(1,906	)		(365	)
Foreign		(982	)		(123	)		(434	)

		(12,150	)		(8,727	)		2,161

	$	103,580		$	144,250		$	124,513

The Company's effective tax rate was different than the statutory U.S. federal income tax rate for the following reasons:


	Fiscal Year Ended January 31,
	2012			2011			2010
Expected provision at statutory U.S. federal tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal tax benefit		3.2			3.2			2.3
Foreign taxes		(2.1	)		(2.1	)		(0.6	)
Federal rehabilitation tax credits		—			(0.8	)		—
Other		(0.2	)		(0.7	)		(0.5	)

Effective tax rate		35.9	%		34.6	%		36.2	%

The significant components of deferred tax assets and liabilities as of January 31, 2012 and 2011 are as follows:


	January 31,
	2012			2011
Deferred tax liabilities:
Prepaid expenses	$	(1,402	)	$	(1,551	)
Depreciation		(4,761	)		(15,922	)

Gross deferred tax liabilities		(6,163	)		(17,473	)

Deferred tax assets:
Deferred rent		37,024			43,005
Inventories		3,093			5,434
Accounts receivable		1,166			747
Net operating loss carryforwards		5,684			5,123
Tax uncertainties		7,651			4,433
Accrued salaries and benefits		13,786			13,496
Other temporary differences		4,437			—

Gross deferred tax assets, before valuation allowances		72,841			72,238

Valuation allowances		(2,754	)		(2,622	)

Net deferred tax assets	$	63,924		$	52,143

Net deferred tax assets are attributed to the jurisdictions in which the Company operates. As of January 31, 2012 and 2011, respectively, $48,762 and $37,170 were attributable to U.S. federal, $12,374 and $13,546 were attributed to state jurisdictions and $2,788 and $1,427 were attributed to foreign jurisdictions.

As of January 31, 2012, certain non-U.S. subsidiaries of the Company had net operating loss carryforwards for tax purposes of approximately $10,503 that do not expire and certain U.S. subsidiaries of the Company had state net operating loss carryforwards for tax purposes of approximately $9,114 that expire from 2016 through 2032. As of January 31, 2011, the Company had a full valuation allowance for certain foreign and state net operating loss carryforwards where it was uncertain the carryforwards would be utilized. The Company had no valuation allowance for certain other foreign and state net operating loss carryforwards where management believes it is more likely than not the tax benefit of these carryforwards will be realized. As of January 31, 2012 and 2011, the non-current portion of net deferred tax assets aggregated $58,681 and $37,789, respectively.

The cumulative amount of the Company's share of undistributed earnings of non-U.S. subsidiaries for which no deferred taxes have been provided was $130,219 as of January 31, 2012. These earnings are deemed to be permanently re-invested to finance growth programs.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:


	January 31,
	2012			2011			2010
Balance at the beginning of the period	$	7,758		$	7,532		$	7,509
Increases in tax positions for prior years		3,466			43			948
Decreases in tax positions for prior years		(310	)		(592	)		(116	)
Increases in tax positions for current year		360			1,000			1,894
Settlements		(2,259	)		(40	)		(924	)
Lapse in statute of limitations		(351	)		(185	)		(1,779	)

Balance at the end of the period	$	8,664		$	7,758		$	7,532

The total amount of net unrecognized tax benefits that, if recognized, would impact the Company's effective tax rate were $3,874 and $6,677 at January 31, 2012 and 2011 respectively. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income, which is consistent with the recognition of these items in prior reporting periods. During the years ended January 31, 2012, 2011 and 2010, the Company recognized a benefit of $1,334, $437 and $427 in interest and penalties. The Company accrued $2,529 and $3,620 for the payment of interest and penalties as of January 31, 2012 and 2011, respectively.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. During the year ended January 31, 2012, the Company settled its Internal Revenue Service examination for the periods ended January 31, 2005 through 2008. The Company has recognized the tax effect of this settlement for previous and future periods in the end of year balances. The Company also began a new Internal Revenue audit for periods ended January 31, 2009 and 2010. State and foreign jurisdictions that remain subject to examination range from fiscal 2002 to 2011 with few exceptions. It is possible that the Federal or any state examination may be resolved within twelve months. Due to the potential for resolution of Federal audit and state examinations, and the expiration of various statutes of limitation, it is possible that the Company's gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $3,340.