9. INCOME TAXES

The components of the income tax expense from continuing operations are as follows:

	2014		2013		2012
Current
Federal	$	10,282,000	$	11,682,000	$	10,380,000
State		96,000		(202,000)		132,000
Total Current		10,378,000		11,480,000		10,512,000

Deferred
Federal		176,000		365,000		(528,000)
State		206,000		63,000		(70,000)
Foreign		(96,000)		-		-
Total Deferred		286,000		428,000		(598,000)

Total Income Tax Expense from Continuing Operations	$	10,664,000	$	11,908,000	$	9,914,000

The total tax provision for the years ended December 31, 2014, 2013, and 2012 was $4.9 million, $10.0 million, $7.4 million, respectively. Those amounts have been allocated to the following financial statement items:

	2014		2013		2012

Income from continuing operations	$	10,664,000	$	11,908,000	$	9,914,000
Loss from discontinued operations		(5,302,000)		(1,690,000)		(1,332,000)
Stockholders' equity, unrealized gain (loss) on investment securities		(182,000)		143,000		83,000
Additional paid in capital, share-based compensation tax benefit		(275,000)		(383,000)		(1,265,000)

Total Income Tax Expense	$	4,905,000	$	9,978,000	$	7,400,000

Deferred tax assets (liabilities) consisted of the following at December 31,

	2014		2013		2012

Reserves on inventory and sales	$	291,000	$	332,000	$	336,000
Credit and loss carryforwards		699,000		413,000		692,000
Stock compensation		1,283,000		896,000		-
Accrued expenses and deferred costs		3,170,000		1,260,000		690,000
Inventory capitalization		142,000		337,000		526,000
Sales tax accrual		8,000		337,000		1,228,000
Total deferred tax assets		5,593,000		3,575,000		3,472,000

Unrealized gain/loss on investments		(294,000)		(476,000)		(333,000)
Prepaid expenses		(779,000)		(710,000)		(752,000)
Depreciation		(6,285,000)		(7,091,000)		(7,729,000)
Stock compensation		-		-		(105,000)
Total deferred tax liabilities		(7,358,000)		(8,277,000)		(8,919,000)

Net deferred tax liabilities	$	(1,765,000)	$	(4,702,000)	$	(5,447,000)

The differences between the United States federal statutory tax rate and the Company's effective tax rate are as follows:

	2014				2013				2012
Statutory federal tax	$	11,093,000	35.0	%	$	13,665,000	35.0	%	$	9,925,000	35.0	%
State income taxes, net of federal benefit		314,000	1.0	%		393,000	1.0	%		736,000	2.6	%
Foreign Taxes		73,000	0.2	%		-	0.0	%		-	0.0	%
Domestic manufacturer deduction		(811,000)	-2.6	%		(979,000)	-2.5	%		(902,000)	-3.2	%
FTC settlement		-	0.0	%		-	0.0	%		1,389,000	4.9	%
Other permanent differences		200,000	0.6	%		173,000	0.4	%		(190,000)	-0.7	%
Research and development and jobs credits		(203,000)	-0.6	%		(459,000)	-1.2	%		(267,000)	-0.9	%
Other state income tax benefits		(113,000)	-0.4	%		(707,000)	-1.8	%		(686,000)	-2.4	%
Other		111,000	0.4	%		(178,000)	-0.4	%		(91,000)	-0.3	%
	$	10,664,000	33.6	%	$	11,908,000	30.5	%	$	9,914,000	35.0	%

The 2014, 2013 and 2012 effective tax rates were impacted by the Company’s extensive state income tax planning. This planning includes taking advantage of Maryland’s apportionment methodology. As a manufacturing entity based in Maryland, the Company utilizes the single sales factor apportionment method in addition to claiming new state jobs credits and research & development credits. These benefits were offset in 2012 by a $3.7 million FTC nondeductible settlement. In 2013 the Company benefited from research and development credits effective January 1, 2013, applicable retroactively to 2012 activity. In 2014 the Company benefited from research and development credits effective January 1, 2014 in addition to filing an amended federal return to claim 2010 research and development credits due to changes in Federal regulations.

The Company has separate company state net operating loss carry forwards totaling $10.6 million start expiring in 2031. Maryland state credits carry forwards totaling $197,000 will begin to expire in 2018.