9. INCOME TAXES

The provision for income taxes consists of the following:

	For the Years Ended December 31,
	2012		2011		2010
Current tax provision (benefit)
Federal	$	1,785	(29,070	)	$	(204,507	)
State	8,033		42,867		28,450
Total current provision (benefit)	9,818		13,797		(176,057		)

Deferred tax provision (benefit)
Federal	—		—		—
State	—		—		—
Total deferred tax provision (benefit)	—		—		—

	2012		2011		2010
Total income tax provision (benefit)	$	9,818	$	13,797	$	(176,057	)

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 $12,850,183 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 2013.

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,
		2012			2011
Deferred tax assets
Net operating loss carryforwards	$	4,873,433		$	3,372,994
Accrued expenses and reserves		1,165,658			1,118,679
Employee stock option expense		295,696			682,810
Inventory		319,830			397,449
Non-employee stock option expense		15,546			79,939
Deferred tax assets		6,670,163			5,651,871
Deferred tax liabilities
Property and equipment		(631,109	)		(768,455	)
Deferred tax liabilities		(631,109	)		(768,455	)
Net deferred assets		6,039,054			4,883,416
Valuation allowance		(6,039,054	)		(4,883,416	)
Net deferred tax assets	$	—		$	—

The valuation allowance increased $1,155,638 for 2012 and decreased $559,266 for 2011.

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

	December 31,
	2012		2011		2010
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	(28.0	)	—		—
Permanent differences	1.2		2.0		9.1
Return to accrual adjustments	—		(2.8	)	(15.0	)
Alternative minimum tax	—		3.4		5.8
Adjustment to temporary differences for stock options	(11.0	)	—		—
Release of valuation allowance – Net operating loss carryforward	—		(39.0	)	(45.2	)
Other	(0.3	)	(0.5	)	(0.5	)
Effective tax (benefit) rate	(0.2	)%	1.0	%	(7.9	)%

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, 2009, 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.