10. INCOME TAXES

The components of income before income taxes for the years ended December 31, 2010, 2011 and 2012 are as follows (in thousands):

	2010		2011		2012

Domestic	$	39,958	$	28,397	$	73,077
Foreign		17,231		14,069		18,547

Total	$	57,189	$	42,466	$	91,624

The following is a reconciliation from the tax computed at statutory income tax rates to the Company's income tax expense for the years ended December 31, 2010, 2011, and 2012 (in thousands):

	2010			2011			2012

Tax computed at statutory U.S. federal income tax rates	$	20,050		$	14,863		$	32,068
Income taxes in excess (below) statutory U.S. tax rates:
Guyana		3,351			2,096			812
Bermuda and Turks & Caicos		1,535			2,854			503
Valuation allowance		5,250			—			832
Bargain purchase gain		(9,458	)		—			—
Foreign tax reserve		(125	)		556			2,359
State taxes		(21	)		149			2,352
Research and development credit		—			(62	)		(1,024	)
Other, net		(975	)		113			555

Income tax expense	$	19,607		$	20,569		$	38,457

The components of income tax expense (benefit) for the years ended December 31, 2010, 2011 and 2012 are as follows (in thousands):

	2010			2011			2012

Current:
United States—Federal	$	6,517		$	(19,716	)	$	18,917
United States—State		1,654			(16	)		1,085
Foreign		11,784			12,721			11,099

Total current income tax expense (benefit)		19,955			(7,011	)	$	31,101

Deferred:
United States—Federal		2,333			29,553			6,124
United States—State		(1,467	)		197			1,769
Foreign		(1,214	)		(2,170	)		(537	)

Total deferred income tax expense (benefit)		(348	)		27,580			7,356

Total income tax expense	$	19,607		$	20,569		$	38,457

Consolidated:
United States—Federal	$	8,850		$	9,837		$	25,041
United States—State		187			181			2,854
Foreign		10,570			10,551			10,562

Total income tax expense	$	19,607		$	20,569		$	38,457

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

	2011			2012

Deferred tax assets:
Receivables reserve	$	4,852		$	4,589
Temporary differences not currently deductible for tax		9,910			12,540
Deferred compensation		1,376			1,851
Foreign tax credit carryforwards		16,755			15,395
Interest rate swap		4,535			4,457
Net operating losses		9,719			1,732
Tax credits		62			—
Pension benefits		640			—
Valuation allowance		(17,315	)		(16,788	)

Total deferred tax asset	$	30,534			23,776

Deferred tax liabilities:
Property, plant and equipment, net	$	55,762		$	58,521
Intangible assets, net		39,477			38,034
Market discount		2,280			2,280
Pension		—			598

Total deferred tax liabilities		97,519			99,433

Net deferred tax liabilities	$	66,985		$	75,657

Deferred tax assets and liabilities are reflected in the accompanying consolidated balance sheets as follows (in thousands):

	2011		2012

Deferred tax assets:
Current	$	21,921	$	8,349
Long term		—		—

Total deferred tax asset	$	21,921	$	8,349

Deferred tax liabilities:
Current	$	—	$	—
Long term		88,906		84,006

Total deferred tax liabilities	$	88,906	$	84,006

Net deferred tax liabilities	$	66,985	$	75,657

As of December 31, 2012, the Company estimated that it had state net operating loss carryforwards of $15.2 million that begin to expire in 2015.

As part of the Alltel Acquisition and the associated levels of future debt and interest service, the Company re-examined its projected mix of foreign source and U.S.-source earnings and concluded it is more likely than not that it will not generate enough foreign source income to utilize its existing foreign tax credits prior to their expiration date. As a result, the Company has placed a full valuation allowance against those credits during 2010. As of December 31, 2012, the Company continued to maintain a full valuation allowance against those credits.

The undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Determination of the amount of unrecognized deferred U.S. income tax liability is not practical because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability.

The following shows the activity related to unrecognized tax benefits during the three years ended December 31, 2012 (in thousands):


Gross unrecognized tax benefits at December 31, 2009	$	5,507
Increase in uncertain tax positions		1,030
Lapse in statute of limitations		(125	)

Gross unrecognized tax benefits at December 31, 2010		6,412
Increase in uncertain tax positions		590
Lapse in statute of limitations		(50	)

Gross unrecognized tax benefits at December 31, 2011		6,952
Increase in uncertain tax positions		3,384
Lapse in statute of limitations		—

Gross unrecognized uncertain tax benefits at December 31, 2012	$	10,336

All $10.3 million of unrecognized tax benefits would affect the effective tax rate if recognized. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes, if material.

The Company and its subsidiaries file income tax returns in the U.S. and in various state and local jurisdictions. The statute of limitations related to the consolidated U.S. federal income tax return is closed for all tax years up to and including 2007. The expiration of the statute of limitations related to the various state income tax returns that the Company and subsidiaries file varies by state. The Company's consolidated federal tax return is currently being audited for the years 2008 through 2011 and the State of Massachusetts for the years 2009 and 2010. The Company does not expect that the amount of unrecognized tax benefits relating to U.S. tax matters will change significantly within the next 12 months.

The Company also files an income tax return in Guyana. See Note 12 relating to certain tax matters pertaining to those filings. There is no expected settlement date of those matters and upon settlement, which might not occur in the near future, the payment may vary significantly from the amounts currently recorded. The Company will continue to update amounts recorded as new developments arise.