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Income Taxes | 12 Months Ended
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Dec. 31, 2012
INCOME TAXES [Abstract] |
INCOME TAXES | 14. Income Taxes Consolidated income before provision for income taxes consists of the following for the years ended December 31, 2010, 2011 and 2012 (U.S. dollars in thousands):
|  | 2010 |  |  | 2011 |  |  | 2012 |
U.S. |  | $ | 141,069 |  |  | $ | 142,929 |  |  | $ | 259,309 |
Foreign |  |  | 66,544 |  |  |  | 83,840 |  |  |  | 85,933 |
Total |  | $ | 207,613 |  |  | $ | 226,769 |  |  | $ | 345,242 |
The provision for current and deferred taxes for the years ended December 31, 2010, 2011 and 2012 consists of the following (U.S. dollars in thousands):
|  | 2010 |  |  | 2011 |  |  | 2012 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 45,761 |  |  | $ | 14,723 |  |  | $ | 70,727 |
State |  |  | 3,825 |  |  |  | 2,245 |  |  |  | 2,425 |
Foreign |  |  | 27,450 |  |  |  | 56,973 |  |  |  | 45,851 |
|  |  | 77,036 |  |  |  | 73,941 |  |  |  | 119,003 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (2,558 | ) |  |  | 17,756 |  |  |  | 12,918 |
State |  |  | 212 |  |  |  | 582 |  |  |  | 656 |
Foreign |  |  | (3,128 | ) |  |  | (18,840 | ) |  |  | (8,980 | )
|  |  | (5,474 | ) |  |  | (502 | ) |  |  | 4,594 |
Provision for income taxes |  | $ | 71,562 |  |  | $ | 73,439 |  |  | $ | 123,597 |
The Company's foreign taxes paid are high relative to foreign operating income and the Company's U.S. taxes paid are low relative to U.S. operating income due largely to the flow of funds among the Company's Subsidiaries around the world. As payments for services, management fees, license arrangements and royalties are made from the Company's foreign affiliates to its U.S. corporate headquarters, these payments often incur withholding and other forms of tax that are generally creditable for U.S. tax purposes. Therefore, these payments lead to increased foreign effective tax rates and lower U.S. effective tax rates. Variations (or shifts) occur in the Company's foreign and U.S. effective tax rates from year to year depending on several factors. These factors include the impact of global transfer prices, the timing and level of remittances from foreign affiliates, profits and losses in various markets, in the valuation of deferred tax assets or liabilities, or changes in tax laws, regulations, accounting principles, or interpretations thereof. NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements The principal components of deferred taxes are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2012 |
Deferred tax assets: |  |  |  |  |  |
Inventory differences |  | $ | 3,796 |  |  | $ | 3,490 |
Foreign tax credit and other foreign benefits |  |  | 25,149 |  |  |  | 42,128 |
Stock-based compensation |  |  | 9,674 |  |  |  | 13,772 |
Accrued expenses not deductible until paid |  |  | 37,992 |  |  |  | 49,258 |
Foreign currency exchange |  |  | 16,927 |  |  |  | 10,947 |
Net operating losses |  |  | 11,656 |  |  |  | 10,561 |
Capitalized research and development |  |  | 14,746 |  |  |  | 10,535 |
Other |  |  | 568 |  |  |  | 648 |
Gross deferred tax assets |  |  | 120,508 |  |  |  | 141,339 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Exchange gains and losses |  |  | 3,300 |  |  |  | 7,504 |
Intangibles step-up |  |  | 12,179 |  |  |  | 18,379 |
Amortization of intangibles |  |  | 14,457 |  |  |  | 15,840 |
Foreign outside basis in controlled foreign corporation |  |  | 16,081 |  |  |  | 32,592 |
Other |  |  | 11,431 |  |  |  | 20,867 |
Gross deferred tax liabilities |  |  | 57,448 |  |  |  | 95,182 |
Valuation allowance |  |  | (11,611 | ) |  |  | (10,522 | )
Deferred taxes, net |  | $ | 51,449 |  |  | $ | 35,635 |
At December 31, 2012, the Company had foreign operating loss carryforwards of approximately $46.2 million for tax purposes, which will be available to offset future taxable income. If not used, $11.6 million of carryforwards will expire between 2013 and 2022, while $34.7 million do not expire. A valuation allowance has been placed on foreign operating loss carryforwards of approximately $41.0 million. The valuation allowance primarily represents amounts for foreign operating loss carryforwards for which it is more likely than not some portion or all of the deferred tax asset will not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary difference, projected future taxable income, tax planning strategies and recent financial operations. When the Company determines that there is sufficient taxable income to utilize the net operating losses, the valuation will be released which would reduce the provision for income taxes. NU SKIN ENTERPRISES, INC. Notes to Consolidated Financial Statements The components of deferred taxes, net on a jurisdiction basis are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2012 |
Net current deferred tax assets |  | $ | 32,867 |  |  | $ | 40,475 |
Net noncurrent deferred tax assets |  |  | 29,661 |  |  |  | 26,302 |
Total net deferred tax assets |  |  | 62,528 |  |  |  | 66,777 |
Net current deferred tax liabilities |  |  | 7 |  |  |  | 2 |
Net noncurrent deferred tax liabilities |  |  | 11,072 |  |  |  | 31,140 |
Total net deferred tax liabilities |  |  | 11,079 |  |  |  | 31,142 |
Deferred taxes, net |  | $ | 51,449 |  |  | $ | 35,635 |
The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in proposed assessments that may result in additional tax liabilities. The actual tax rate for the years ended December 31, 2010, 2011 and 2012 compared to the statutory U.S. Federal tax rate is as follows:
|  | Year Ended December 31, |
|  | 2010 |  |  | 2011 |  |  | 2012 |
Income taxes at statutory rate |  |  | 35.00 | % |  |  | 35.00 | % |  |  | 35.00 | %
Non-deductible expenses |  |  | .10 |  |  |  | .16 |  |  |  | .12 |
Extraterritorial income tax credit |  |  | .00 |  |  |  | (3.39 | ) |  |  | .00 |
Other |  |  | (.63 | ) |  |  | .62 |  |  |  | .68 |
|  |  | 34.47 | % |  |  | 32.39 | % |  |  | 35.80 | %
The lower effective tax rate in 2011 compared to 2010 and 2012 was primarily attributable to a one-time discrete tax benefit of $7.7 million associated with the effective settlement of an IRS audit for tax years 2005 – 2008. In 2011, the Company entered into a closing agreement with the IRS on the Extraterritorial Income Exclusion for the exportation of products outside the United States.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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