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INCOME TAXES
 12 Months Ended
Dec. 31, 2011
INCOME TAXES  
INCOME TAXES

9.      INCOME TAXES

 

The provision for income taxes consists of the following:

 

 

 

For the Years Ended December 31,

 

 

 

2011

 

2010

 

2009

 

Current tax provision (benefit)

 

 

 

 

 

 

 

Federal

 

$

(29,070

)

$

(204,507

)

$

(3,655,637

)

State

 

42,867

 

28,450

 

(181,953

)

Total current provision (benefit)

 

13,797

 

(176,057

)

(3,837,590

)

 

 

 

 

 

 

 

 

Deferred tax provision (benefit)

 

 

 

 

 

 

 

Federal

 

—

 

—

 

—

 

State

 

—

 

—

 

—

 

Total deferred tax provision (benefit)

 

—

 

—

 

—

 

Total income tax provision (benefit)

 

$

13,797

 

$

(176,057

)

$

(3,837,590

)

 

The Company recognized a tax benefit in 2009 primarily due to net operating losses incurred in 2009.

 

The Company recognized a net tax benefit due to an additional refund for net operating losses in 2009 mitigated by Alternative Minimum Tax in 2010.

 

The Company has $8,893,855 in tax benefits attributable to carryback losses for federal tax purposes.  The loss carryforwards will begin to expire in 2027 for federal tax purposes and will begin to expire for state tax purposes in 2012.

 

Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes.  The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

 

 

 

December 31,

 

 

2011

 

2010

 

Deferred tax assets

 

 

 

 

 

 

Net operating loss carryforwards

 

$

3,372,994

 

$

4,228,826

 

Accrued expenses and reserves

 

 

1,118,679

 

 

907,624

 

Employee stock option expense

 

 

682,810

 

 

682,810

 

Inventory

 

 

397,449

 

 

385,856

 

Non-employee stock option expense

 

 

79,939

 

 

81,310

 

Charitable contribution carryforwards

 

 

—

 

 

26,164

 

Deferred tax assets

 

 

5,651,871

 

 

6,312,590

 

Deferred tax liabilities

 

 

 

 

 

 

 

Property and equipment

 

 

(768,455

)

 

(869,908

)

Deferred tax liabilities

 

 

(768,455

)

 

(869,908

)

 

 

 

2011

 

2010

Net deferred assets

 

 

4,883,416

 

 

5,442,682

 

Valuation allowance

 

 

(4,883,416

)

 

(5,442,682

)

Net deferred tax liabilities

 

$

—

 

$

—

 

 

A reconciliation of income taxes based on the federal statutory rate and the provision (benefit) for income taxes is summarized as follows:

 

 

 

December 31,

 

 

 

2011

 

2010

 

2009

 

Income tax (benefit) at the federal statutory rate

 

35.0

%

35.0

%

(35.0

)%

State tax (benefit), net of federal (benefit)

 

2.9

 

2.9

 

(2.9

)

Increase in valuation allowance

 

—

 

—

 

4.6

 

Permanent differences

 

2.0

 

9.1

 

3.0

 

Return to accrual adjustments

 

(2.8

)

(15.0

)

(0.3

)

Alternative minimum tax

 

3.4

 

5.8

 

—

 

Release of valuation allowance – Net operating loss carryforward

 

(39.0

)

(45.2

)

—

 

Other

 

(0.5

)

(0.5

)

1.6

 

Effective tax (benefit) rate

 

1.0

%

(7.9

)%

(29.0

)%

 

The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions.  The Company’s federal income tax returns for all tax years ended on or after December 31, 2008, remain subject to examination by the Internal Revenue Service.  The Company’s state and local income tax returns are subject to examination by the respective state and local authorities over various statutes of limitations, most ranging from three to five years from the date of filing.