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INCOME TAXES
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure  
INCOME TAXES
NOTE 6: INCOME TAXES
 
The following table lists the components of the provision for income taxes:
                   
Years ended December 31,
  
2012
    
2011
    
2010
  
(in thousands)
                  
Current provision (benefit):
                  
Federal
   $ 3,146     $ 1,757     $ 989  
State
     94       (14 )     182  
Deferred provision (benefit):
                        
Federal
     (493 )     (90 )     165  
State
     (5 )     14       (297 )
Total income tax provision
   $ 2,742     $ 1,667     $ 1,039  
 
A reconciliation between the federal statutory rate and Marine Products’ effective tax rate is as follows:
                   
Years ended December 31,
  
2012
    
2011
    
2010
  
Federal statutory rate
     34.0 %     34.0 %     34.0 %
State income taxes, net of federal benefit
     0.5       0.8       1.4  
Tax-exempt interest
     (2.3 )     (3.0 )     (6.6 )
Tax-exempt (gain) loss on SERP assets
     (0.6 )     0.2       —  
Tax-exempt gain – benefit plan financing
     —       (8.4 )     —  
Manufacturing deduction
     (3.0 )     (2.0 )     (3.2 )
Change in state credits
     —       —       (10.5 )
Change in valuation allowance
     —       —       4.5  
Other
     (0.4 )     (1.7 )     1.6  
Effective tax rate
     28.2 %     19.9 %     21.2 %
 
 
Significant components of the Company’s deferred tax assets and liabilities are as follows:
             
December 31,
  
2012
    
2011
  
(in thousands)
            
Deferred tax assets:
            
Warranty costs
   $ 895     $ 701  
Sales incentives and discounts
     942       750  
Stock-based compensation
     838       755  
Pension
     2,212       2,242  
All others
     331       267  
State credits and NOL’s
     4,450       4,099  
Valuation allowance
     (4,155 )     (3,783 )
Total deferred tax assets
     5,513       5,031  
Deferred tax liabilities:
                
Depreciation and amortization expense
     (699 )     (673 )
Net deferred tax assets
   $ 4,814     $ 4,358  
 
Total net income tax payments (refunds) were $3,655,000 in 2012, $880,000 in 2011 and $(4,743,000) in 2010.  As of December 31, 2012 the company has net operating loss carry forwards related to state income taxes and credits of approximately $18.3 million that will expire between 2013 and 2030. As of December 31, 2012 the company has a valuation allowance of approximately $4.2 milllion, representing the tax affected amount of  state tax credits and loss carry forwards that the company does not expect to utilize, against the corresponding deferred tax asset.
 
The Company’s policy is to record interest and penalties related to income tax matters as income tax expense. Accrued interest and penalties were immaterial as of December 31, 2012 and 2011.
 
In accordance with the accounting guidance relating to the accounting for uncertainty in income tax reporting, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions, the Company did not recognize a material adjustment in the liability for unrecognized income tax benefits.
 
As of December 31, 2012 and 2011, our liability for unrecognized tax benefits was $14,000 and $23,000, respectively, all of which would affect our effective rate if recognized.
 
The Company and its subsidiaries are subject to U.S. federal and state income tax in multiple jurisdictions. In many cases our uncertain tax positions are related to tax years that remain open and subject to examination by the relevant taxing authorities. The Company’s 2009 through 2012 tax years remain open to examination.
 
It is reasonably possible that the amount of the unrecognized benefits with respect to our unrecognized tax positions will increase or decrease in the next 12 months. These changes may be the result of, among other things, state tax settlements under voluntary disclosure agreements. However, quantification of an estimated range cannot be made at this time.
 
The American Taxpayer Relief Act of 2012 (“Act”) was signed into law on January 2, 2013 and includes an extension for one year of the 50% bonus depreciation allowance. The provision specifically applies to qualifying property placed in service before January 1, 2014. The acceleration of deductions on 2012 qualifying capital expenditures resulting from the bonus depreciation provision had no impact on our 2012 effective tax rate.  Additionally, the Act retroactively reinstates the provisions of the research and experimentation credits (“R&E credits”) for 2012 and 2013.  As a result of the retroactive extension, our effective rate for the first quarter of 2013 may include a tax benefit from the R&E credits attributable to 2012 and the first quarter of 2013.