Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Taxes  
Income Taxes

6.  Income Taxes

 

Deferred tax attributes resulting from differences between financial and accounting amounts and tax basis of assets and liabilities at December 31, 2012 and 2011 are as follows:

 

 

 

2012

 

2011

 

Current assets

 

 

 

 

 

Accruals and reserves

 

$

280

 

$

329

 

Net current deferred tax assets

 

$

280

 

$

329

 

 

 

 

2012

 

2011

 

Non-current assets

 

 

 

 

 

Accruals and reserves

 

$

224

 

$

224

 

Depreciation

 

12

 

27

 

Net non-current deferred tax assets

 

$

236

 

$

251

 

Total deferred tax assets

 

$

516

 

$

580

 

 

The provision for income taxes is as follows:

 

 

 

Year ended December 31,

 

 

 

2012

 

2011

 

2010

 

Current:

 

 

 

 

 

 

 

Federal

 

$

2,799

 

$

2,452

 

$

1,800

 

State

 

536

 

460

 

546

 

Foreign

 

201

 

264

 

170

 

 

 

3,536

 

3,176

 

2,516

 

Deferred:

 

 

 

 

 

 

 

Federal

 

54

 

172

 

211

 

State

 

10

 

100

 

62

 

 

 

64

 

272

 

273

 

 

 

$

3,600

 

$

3,448

 

$

2,789

 

Effective Tax Rate

 

39.6

%

38.4

%

38.7

%

 

The effective tax rate for year ended December 31, 2010 was impacted by a benefit of $78 thousand related to the reversal of the Company’s liability related to uncertain tax positions.

 

The reasons for the difference between total tax expense and the amount computed by applying the U.S. statutory federal income tax rate to income before income taxes are as follows:

 

 

 

Year ended December 31,

 

 

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Statutory rate applied to pretax income

 

$

3,090

 

$

3,056

 

$

2,456

 

State income taxes, net of federal income tax benefit

 

334

 

325

 

399

 

Foreign income taxes under U.S. statutory rate

 

(21

)

(4

)

(5

)

Other items

 

197

 

71

 

(61

)

Income tax expense

 

$

3,600

 

$

3,448

 

$

2,789

 

 

The Company receives a tax deduction from the gains realized by employees on the exercise of certain non-qualified stock options for which the tax effect of the difference between the book and tax deduction is recognized as a component of stockholders’ equity.

 

The Company accounts for uncertainties in accordance with FASB ASC 740 “Income Taxes”. This standard clarified the accounting for uncertainties in income taxes. The standard prescribes criteria for recognition and measurement of tax positions. It also provides guidance on derecognition, classification, interest and penalties, and disclosures related to income taxes associated with uncertain tax positions.

 

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal consolidated tax return and its state tax return in New Jersey and its Canadian tax return as major tax jurisdictions. The only periods subject to examination for the Company’s federal return are the 2009, 2010 and 2011 tax years.  The current periods subject to examination for the Company’s state returns in New Jersey are years 2009, 2010 and 2011. The current periods subject to examination for the Company’s Canadian tax returns are the years 2009 through 2011. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense when assessed. No liability was recorded for interest or penalties related to uncertain tax positions at December 31, 2012 and 2011.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

 

 

Federal, State
and Foreign Tax

 

Balance at January 1, 2010

 

$

78

 

Decrease based on tax positions related to prior years

 

(78

)

Net Unrecognized Tax Benefit at December 31, 2010

 

$

0

 

 

The most recent IRS examination was of the Company’s 2006-2007 tax returns which were completed by the Internal Revenue Service (“IRS”) as of March 1, 2010, with no adjustments proposed by the IRS. Management believes that all uncertain tax positions related to those years were resolved at that time.

 

For financial reporting purposes, income before income taxes includes the following components:

 

 

 

Year ended December 31

 

 

 

2012

 

2011

 

2010

 

United States

 

$

8,451

 

$

8,229

 

$

6,696

 

Canada

 

638

 

758

 

514

 

 

 

$

9,089

 

$

8,987

 

$

7,210