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INCOME TAXES
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 8 – Income Taxes

 

The Company has adopted accounting standards which prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Additionally, these accounting standards specify that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. The Company has made no reclassifications between current taxes payable and long term taxes payable under this guidance. Also, the Company had no amounts of unrecognized tax benefits that, if recognized, would affect its effective income tax rate for the years ended December 31, 2012, 2011 and 2010.

 

The Company’s policy for deducting interest and penalties is to treat interest as interest expense and penalties as taxes. As of December 31, 2012, the Company had no amount accrued for the payment of interest and penalties related to unrecognized tax benefits.

 

The tax return years 2008 through 2012 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. Net operating losses generated on a tax return basis by the Company for calendar years 1999 through 2004, 2009, 2010 and 2012 remain open to examination by the major domestic taxing jurisdictions.

 

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2012 and 2011 are as follows:

 

    DECEMBER 31,  
    2012     2011  
Deferred tax liabilities:                
Fixed assets   $ (7,218,000 )   $ (6,839,000 )
                 
Total deferred tax liabilities     (7,218,000 )     (6,839,000 )
                 
Deferred tax assets:                
Net operating loss carryforwards     3,767,000       3,330,000  
Accruals and allowances     233,000       415,000  
Tax credits     334,000       298,000  
Other – net     77,000       75,000  
                 
Total deferred tax assets     4,411,000       4,118,000  
                 
Valuation allowance     (163,000 )     (224,000 )
                 
Deferred tax assets net of valuation allowance     4,248,000       3,894,000  
                 
Net deferred tax liabilities   $ (2,970,000 )   $ (2,945,000 )

 

These amounts are presented in the financial statements as follows:

 

    DECEMBER 31,  
    2012     2011  
             
Current deferred tax assets   $ 310,000     $ 490,000  
Deferred income taxes (non-current)     (3,280,000 )     (3,435,000 )
                 
    $ (2,970,000 )   $ (2,945,000 )

 

The components of the provision for income taxes consist of the following:

 

    YEARS ENDED DECEMBER 31,  
    2012     2011     2010  
Current:                        
Federal   $ 18,000     $ -     $ (25,000 )
State   $ 65,000     $ 128,000     $ 23,000  
Foreign     -       4,000       -  
Total current     83,000       132,000       (2,000 )
                         
Deferred:                        
Federal     95,000       305,000       142,000  
State     (41,000 )     (229,000 )     26,000  
Foreign     (30,000 )     -       -  
Total deferred     24,000       76,000       168,000  
                         
    $ 107,000     $ 208,000     $ 166,000  

 

The provision for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (34% in 2012, 2011 and 2010) to income before taxes as follows:

 

    YEARS ENDED DECEMBER 31,  
    2012     2011     2010  
                   
Computed expected federal income tax   $ 49,000     $ 243,000     $ 76,000  
State income taxes, net of federal benefit     38,000       (144,000 )     80,000  
Non-deductible expenses     24,000       41,000       39,000  
Other     (4,000 )     68,000       (29,000 )
                         
    $ 107,000     $ 208,000     $ 166,000  

 

At December 31, 2012, the Company had net operating loss carryforwards for federal income tax return purposes of approximately $10,276,000 which expire between 2019 and 2032. The Company has net operating loss carryforwards for state income tax purposes of approximately $3,421,000 that begin to expire in 2013. A substantial part of this carryforward is subject to separate return limitations.

 

The Company’s ability to utilize its net operating loss carryforwards and other deferred tax assets may be limited in the event of a 50% or more ownership change within any three-year period. Future federal net operating losses generated by the Company can be carried forward for 20 years.

 

In 2010 California Senate bill 858 was signed which suspends the ability to use net operating losses in the 2010 and 2011 tax years and extends the 20-year carryforward period to account for the suspension periods. Suspended net operating losses for 2008, 2009 and 2010 will be allowed additional carryover periods of three years, two years and one year respectively. This may give rise to a tax expense for any such taxable income rising out of the disallowable two year period.

 

It is the intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. The company does not provide for U.S. income taxes on the earnings of foreign subsidiaries as such earnings are to be reinvested indefinitely. As of December 31, 2012, there is a minimal cumulative amount of earnings upon which U.S. income taxes have not been provided.