NOTE 10—INCOME TAXES

The Company’s income tax expense amounts for the three months ended April 30, 2014 and 2013 differed from the expected income tax expense amounts computed by applying the federal corporate income tax rate of 35% to income before income taxes for the periods as shown in the table below.


	Three Months Ended April 30,
	2014			2013
Computed expected income tax expense	$	2,343,000		$	3,801,000
State income taxes, net of federal tax benefit		300,000			332,000
Permanent differences, net		(715,000	)		(237,000	)
Other, net		(34,000	)		24,000

	$	1,894,000		$	3,920,000

For the three months ended April 30, 2014 and 2013, the favorable income tax effects of permanent differences related primarily to the exclusion from taxable income of the income attributable to noncontrolling interest entities (which are considered partnerships for income tax reporting purposes) and the domestic manufacturing deduction. As of April 30, 2014, the amount presented in the condensed consolidated balance sheet for other current assets included prepaid income taxes of approximately $721,000. As of January 31, 2014, the amount presented in the condensed consolidated balance sheet for accrued expenses included accrued income taxes of approximately $303,000. The Company’s condensed consolidated balance sheets as of April 30, 2014 and January 31, 2014 also included net deferred income tax liabilities in the amounts of approximately $1,191,000 and $115,000, respectively.

The Company is subject to income taxes in the United States of America and in various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for its fiscal years ended on or before January 31, 2010. The Company is undergoing an audit of its income tax return filed in the state of California for the year ended January 31, 2013. The Company does not have reason to expect any material changes to its income tax liability resulting from the outcome of this audit and as a result has not accrued a liability at April 30, 2014.