(10) Income Taxes

The Company’s income tax provision (benefit) for the years ended December 31, 2013, 2012 and 2011, consists of the following (in thousands):

	Years Ended December 31,
	2013		2012			2011
Current:
Federal	$	4,353	$	4,301		$	3,752
State	824		768			701
	5,177		5,069			4,453
Deferred:
Federal	641		699			396
State	99		(89		)	56
	740		610			452
Total income tax provision	$	5,917	$	5,679		$	4,905

At December 31, 2013, the Company had net operating loss carryforwards for federal income tax purposes of approximately $1.0 million, which are available to offset future taxable income and expire during the federal tax years ending December 31, 2019, through 2024. The future benefit of the federal net operating loss carryforwards will be limited to approximately $300,000 per year in accordance with Section 382 of the Internal Revenue Code.

The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):

	2013			2012
Current deferred tax assets:
Reserves	$	495		$	383
Inventory capitalization	244			205
Compensation programs	204			245
Retirement liability	33			55
Equity-based compensation	246			228
Total current deferred tax assets	$	1,222		$	1,116

Long-term deferred tax assets / (liabilities):
Excess of book over tax basis of fixed assets	$	(2,413	)	$	(1,688	)
Goodwill	(827		)	(751		)
Intangible assets	—			(69		)
Total long-term deferred tax liabilities	(3,240		)	(2,508		)
Net operating loss carryforwards	342			443
Deferred rent	46			67
Intangible assets	5			—
Compensation programs	411			408
Total long-term deferred tax assets	804			918
Net long-term deferred tax liabilities	$	(2,436	)	$	(1,590	)

The amounts recorded as deferred tax assets as of December 31, 2013 and 2012, represent the amount of tax benefits of existing deductible temporary differences or carryforwards that are more likely than not to be realized through the generation of sufficient future taxable income within the carryforward period. The Company has total deferred tax assets of $2.0 million at December 31, 2013, that it believes are more likely than not to be realized in the carryforward period. Management reviews the recoverability of deferred tax assets during each reporting period.

The actual tax provision for the years presented differs from the “expected” tax provision for those years, computed by applying the U.S. federal corporate rate of 34% to income before income tax expense as follows:

	Years Ended December 31,
	2013		2012		2011
Computed “expected” tax rate	34.0	%	34.0	%	34.0	%
Increase (decrease) in income taxes resulting from:
State taxes, net of federal tax benefit	3.6		2.7		3.4
Meals and entertainment	0.1		0.1		0.1
R&D credits	(1.0	)	(0.1	)	(0.4	)
Domestic production deduction	(2.4	)	(2.5	)	(2.8	)
Non-deductible ISO stock option expense	0.2		0.1		0.1
Unrecognized tax benefits	(0.1	)	(0.2	)	(2.4	)
Income of non-controlling interests	—		—		(1.0	)
Other	—		0.2		0.3
Effective tax rate	34.4	%	34.3	%	31.3	%

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company has not been audited by any state for income taxes with the exception of returns filed in Michigan which have been audited through 2004, and income tax returns filed in Massachusetts for 2005 and 2006, and Florida for 2007, 2008 and 2009 (which are currently being audited). The Company’s federal tax return for 2008 has been audited. Federal and state tax returns for the years 2010 through 2012 remain open to examination by the IRS and various state jurisdictions.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) resulting from uncertain tax positions is as follows (in thousands):

	December 31,
	2013			2012
Gross UTB balance at beginning of fiscal year	$	290		$	320
Increases for tax positions of prior years	10			—
Reductions for tax positions of prior years	(25		)	(30		)
Gross UTB balance at end of fiscal year	$	275		$	290

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2013 and 2012, are $275,000 and $290,000, respectively, for each year.

At December 31, 2013 and 2012, there was no accrued interest or penalties on uncertain tax positions.

At December 31, 2013, all of the unrecognized tax benefits relate to tax returns of a specific state jurisdiction that are currently under examination. Accordingly, the Company expects a reduction of this amount during 2014, since the Company expects to resolve this examination in 2014.