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3 - Income Taxes

12 Months Ended

Dec. 31, 2014

3—Income Taxes— The provision for income tax expense consists of the following:

	2014	2013
Current:
Federal…………………………..	$ 907,000	$ 967,000
State………………………………	42,000	61,000
Deferred……………………………	6,000	119,000
	$ 955,000	$1,147,000

The following is a reconciliation of the statutory federal income tax rate to the actual effective tax rate:

	2014		2013
	Amount	%	Amount	%
Expected tax at U.S. statutory rate…………	$ 988,000	34. 0	$ 1,233,000	34.0
Permanent differences………………………	(61,000)	(2.1)	(127,000)	(3.5)
State taxes, net of federal benefit………….	28,000	1.0	41,000	1.1
Income tax expense…………………………	$ 955,000	32.9	$ 1,147,000	31.6

The Company’s effective tax rates were lower than the U.S. federal statutory rate in 2014 and 2013 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

The deferred tax liabilities and assets consist of the following:

	2014	2013

Depreciation and amortization………………………………..	$ (1,107,275)	$ (1,065,275)
Inventory………………………………………………………..	283,359	256,474
Accrued vacation………………………………………………	108,642	100,314
Allowance for doubtful accounts……………………………..	53,625	52,500
Other, net……………………………………………………….	565	903
	446,191	410,191
	$ (661,084)	$ (655,084)

Valuation allowances related to deferred taxes are recorded based on the “more likely than not” realization criteria. The Company reviews the need for a valuation allowance on a quarterly basis for each of its tax jurisdictions. A deferred tax valuation allowance was not required at December 31, 2014 or 2013.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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