Notes to CoNsolidated FiNaNCial statemeNts Note 15 – Income Taxes (continued) The Company has U.S. state and local loss credit carryforwards with tax benefits totaling $1.7 million and $3.3 million, respectively,  portions of which will expire at the end of 2012. In addition, the Company has loss carryforwards in various non-U.S. jurisdictions with  tax benefits totaling $136.2 million having various expiration dates, as well as tax credit carryforwards of $0.5 million. The Company has  provided valuation allowances of $139.7 million against certain of these carryforwards. The majority of the non-U.S. loss carryforwards  represent local country net operating losses for branches of the Company or entities treated as branches of the Company under U.S. tax  law. Tax benefits have been recorded for these losses in the United States. The related local country net operating loss carryforwards  are offset fully by valuation allowances. In addition to loss and credit carryforwards, the Company has provided valuation allowances of  $40.0 million against other deferred tax assets. As of December 31, 2011, the Company had approximately $87.2 million of total gross unrecognized tax benefits. Included in this  amount was approximately $45.3 million, which represented the amount of unrecognized tax benefits that would favorably impact the  Company’s effective income tax rate in any future periods if such benefits were recognized. As of December 31, 2011, the Company  anticipates a decrease in its unrecognized tax positions of approximately $42.0 million to $43.0 million during the next 12 months.  The anticipated decrease is primarily due to settlements with tax authorities. As of December 31, 2011, the Company has accrued  approximately $9.0 million of interest and penalties related to uncertain tax positions. The Company records interest and penalties  related to uncertain tax positions as a component of income tax expense. As of December 31, 2010, the Company had approximately $77.8 million of total gross unrecognized tax benefits. Included in this  amount was approximately $46.1 million, which represents the amount of unrecognized tax benefits that would favorably impact the  Company’s effective income tax rate in any future periods if such benefits were recognized. As of December 31, 2010, the Company  had accrued approximately $6.8 million of interest and penalties related to uncertain tax positions. The Company records interest and  penalties related to uncertain tax positions as a component of income tax expense. The following table reconciles the Company’s total gross unrecognized tax benefits for the years ended December 31, 2011 and 2010: During 2011, gross unrecognized tax benefits increased primarily due to net additions related to various prior year and current year  tax matters, including U.S. state and local taxes, and taxes related to the Company’s international operations. These increases were  partially offset by reductions related to prior year and current year tax matters, including U.S. state and local taxes and taxes related to  the Company’s international operations, and lapses in statutes of limitation on various tax matters. The increase in gross unrecognized tax benefits of $5.3 million during 2010 was primarily due to net additions related to various  prior year and current year tax matters, including U.S. state and local taxes, tax credits and taxes related to the Company’s  international operations. As of December 31, 2011, the Company is subject to examination by the IRS for tax years 2006 to the present. The Company is also  subject to tax examination in various U.S. state and local tax jurisdictions for tax years 2007 to the present, as well as various foreign  tax jurisdictions, including Brazil, Germany, India and Canada for tax years 2004 to the present. The current portion of the Company’s  unrecognized tax benefits is presented on the Consolidated Balance Sheets within income taxes payable, and the non-current portion  is presented as a component of other non-current liabilities. THE TIMKEN COMPANY 80 2011 2010 Beginning balance, January 1 $ 77.8 $ 77.8 Tax positions related to the current year: Additions  1.3   5.3  Tax positions related to prior years: Additions  13.7   15.9  Reductions  (5.6)  (8.7) Settlements with tax authorities  –   (9.0) Lapses in statutes of limitation  –   (3.5) Ending balance, December 31 $ 87.2 $ 77.8