2010 10-K: Part II 15. Income Taxes Income Tax Expense and Effective Tax Rate Income Tax Expense The following table shows our income tax expense and our effective  tax rate: The following table reconciles our income tax expense at the U.S.  federal income tax rate of 35% to income tax expense as recorded: Income tax expense consists of the following: ($000)  2010 2009  2008 Income before income taxes and equity $ 127,791 $127,607  $ 143,128 in net income of unconsolidated entities Equity in net income of  1,422 1,165  1,321 unconsolidated entities Net (income) loss attributable  (87) 132  (397) to noncontrolling interests Total  $ 129,126 $128,904  $ 144,052 Income tax expense  $ 42,756 $ 46,775  $ 54,423 Effective tax rate  33.1% 36.3%  37.8% ($000)  2010 2009  2008 Current tax expense: U.S. Federal  $ 38,901 $ 41,347  $ 37,143 State  2,445 4,942  3,179 Non-U.S.  4,122 3,856  2,875 45,468  50,145   43,197 Deferred tax expense (benefit): U.S. Federal  61 (713)  10,712 State  (7) (38)  524 Non-U.S.  (2,766)  (2,619)  (10) (2,712)  (3,370)   11,226 Income tax expense  $ 42,756 $ 46,775  $ 54,423 2010 2009  2008 ($000, except percentages)  Amount  % Amount  %  Amount  % Income tax expense at U.S. federal rate  $ 45,194  35.0% $ 45,117  35.0%  $ 50,418  35.0% State income taxes, net of federal income tax benefit  1,756  1.3 3,470  2.7  3,133  2.2 State income taxes, impact of enacted law change  —  — —  —  (884)  (0.6) on deferred tax assets Stock option activity  97  0.1 (396)  (0.3)  638  0.4 Disqualifying dispositions on incentive stock options  —  — (68)  —  (662)  (0.5) Non-U.S. withholding taxes, net of federal income tax effect, 77  0.1 (1,311)  (1.0)  808  0.6 and foreign tax credits Net change in valuation allowance related to non-U.S. (1,186)  (0.9) 1,221  0.9  (1,209)  (0.8) deferred tax assets, primarily net operating losses Impact of equity in net income of unconsolidated entities 79  0.1 (70)  —  (173)  (0.1) Difference between U.S. federal statutory and foreign tax rates  (2,567)  (2.0) 266  0.2  (687)  (0.5) Non-deductible deposit penalty  —  — 1,384  1.1  —  — Expenses related to treatment of stock options originally  —  — 1,082  0.8  —  — considered incentive stock options, subject to limitation for tax purposes Adjustment to accruals for state taxes  (2,633)  (2.0) Change in unrecognized tax benefits  2,869  2.2 (1,786)  (1.4)  3,007  2.1 Other tax credits  (984)  (0.8) (1,923)  (1.5)  —  — Other—net  54  — (211)  (0.2)  34  — Total income tax expense  $ 42,756  33.1% $ 46,775  36.3%  $ 54,423  37.8% 132