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Income Taxes
6 Months Ended
Jun. 30, 2012
Income Taxes [Abstract]  
Income Taxes

Note 12 – Income Taxes

 

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, as well as the Oregon and California state jurisdictions.  The Company is no longer subject to U.S. federal or Oregon state tax authority examinations for years before 2008 and California state tax authority examinations for years before 2004.  During 2010, the Internal Revenue Service concluded an examination of the Company’s U.S. income tax returns through 2008.  The results of these examinations had no significant impact on the Company’s financial statements.

 

Income taxes are accounted for using the asset and liability method.  Under this method a deferred tax asset or liability is determined based on the enacted tax rates which will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company’s income tax returns.  The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.  Valuation allowances are established to reduce the net carrying amount of deferred tax assets if it is determined to be more likely than not, that all or some portion of the potential deferred tax asset will not be realized.

 

The Company applies the provisions of FASB ASC 740, Income Taxes, relating to the accounting for uncertainty in income taxes.  The Company periodically reviews its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate.  This review takes into consideration the status of current taxing authorities’ examinations of the Company’s tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment.

 

The Company recorded a reduction in its liability of $39,000 for unrecognized tax benefits relating to temporary differences settled during the second quarter of 2012. The Company had gross unrecognized tax benefits relating to California tax incentives of $511,000 recorded as of June 30, 2012.  If recognized, the unrecognized tax benefit would reduce the 2012 annual effective tax rate by 0.2%.  During the six months ended June 30, 2012, the Company recognized a benefit of $16,000 in interest reversed primarily due to the reduction of to its liability for unrecognized tax benefits during the same period.  Interest expense is reported by the Company as a component of tax expense.  As of June 30, 2012, the accrued interest related to unrecognized tax benefits is $150,000.