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8. Income Taxes | 12 Months Ended
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Dec. 31, 2013
Notes |
8. Income Taxes | 8. INCOME TAXES Income tax expense consisted of the following:
| 2013 |  | 2012
| (in thousands)
Federal Income Tax: |  |  |
Current | $ 4,273 |  | $ 4,020
Deferred | (39) |  | (101)
State Income Tax: |  |  |
Current | 329 |  | 472
Deferred | (2) |  | (16)
Foreign Income Tax: |  |  |
Current | -- |  | --
Deferred | 330 |  | (329)
Income Tax Expense | $ 4,891 |  | $ 4,046
Pre-tax income included foreign income/(losses) of $1,375,000 and ($1,531,000) in 2013 and 2012, respectively. Total income tax expense differed from statutory income tax expense, computed by applying the U.S. federal income tax rate of 34% to earnings before income tax, as follows:
| 2013 |  | 2012
| (in thousands)
Computed Statutory Income Tax Expense | $ 5,075 |  | $ 3,693
State Income Tax, Net of Federal Tax Benefit | 220 |  | 296
Foreign Tax Rate Differential | (149) |  | 168
Manufacturing Deduction | (299) |  | (180)
Reduction in Tax Uncertainties | (19) |  | (16)
Other - Net | 63 |  | 85
Income Tax Expense | $ 4,891 |  | $ 4,046
A deferred income tax (expense) benefit results from temporary timing differences in the recognition of income and expense for income tax and financial reporting purposes. The components of and changes in the net deferred tax assets (liabilities) which give rise to this deferred income tax (expense) benefit for the years ended December 31, 2013 and 2012 are as follows:
| December 31,
| 2013 |  | 2012
| (in thousands)
Deferred Tax Assets: |  |  |
Compensation Assets | $ 117 |  | $ 109
Inventory Valuation | 516 |  | 491
Accounts Receivable Valuation | 267 |  | 232
Deferred Litigation Costs | 57 |  | 62
Foreign Net Operating Losses | 154 |  | 509
Other | 335 |  | 290
Compensation Liabilities | 347 |  | 287
Total Deferred Assets | $ 1,793 |  | $ 1,980
Deferred Tax Liabilities: |  |  |
Prepaid Expenses | (386) |  | (399)
Depreciation and Amortization | (1,568) |  | (1,445)
Total Deferred Liabilities | ($1,954) |  | ($1,844)
Total Deferred Tax Asset (Liability) | ($161) |  | $136
Management believes it is more likely than not that the Company will have sufficient taxable income when these timing differences reverse and that the deferred tax assets will be realized and, accordingly, no valuation allowance is deemed necessary. The Company is currently subject to audit by the Internal Revenue Service for the calendar years ended 2012, 2011 and 2010. The Company and its Subsidiaries state income tax returns are subject to audit for the calendar years ended 2009 through 2012. As of December 31, 2012, the Company had provided a liability of $119,000 for unrecognized tax benefits related to various federal and state income tax matters, which is included in Other Long Term Liabilities. Of this amount, the amount that would impact the Company’s effective tax rate, if recognized, was $85,000. The difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate consists of items that are offset by the federal tax benefit of state income tax items of $34,000. The reserve at December 31, 2013 was $100,000, the most of which impacts the effective tax rate. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year:
| 2013 |  | 2012
Beginning Unrecognized Tax Benefits – | $ 119 |  | $ 135
Current Year – Increases | --- |  | ---
Current Year – Decreases | --- |  | ---
Current Year – Interest/Penalties | 5 |  | 6
Expired Statutes | (24) |  | (22)
Ending Unrecognized Tax Benefits – | $ 100 |  | $ 119

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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