Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

7.  Income Taxes

The amounts of income tax expense (benefit) reflected in operations is as follows:

	2013			2012
Current:
Federal	$	899,928		$	843,812
State		118,092			115,111
Foreign		539,162			523,752
		1,557,182			1,482,675
Deferred:
Federal		(59,240	)		(31,374	)
State		(6,596	)		(4,685	)
Foreign		(360	)		1,199
		(66,196	)		(34,860	)
	$	1,490,986		$	1,447,815

The current state tax provision was comprised of taxes on income, the minimum capital tax and other franchise taxes related to the jurisdictions in which the Company's facilities are located.

A summary of United States and foreign income before income taxes follows:

	2013		2012
United States	$	2,306,909	$	2,169,451
Foreign		3,186,982		2,827,595
	$	5,493,891	$	4,997,046

As discussed in Note 10 below, for segment reporting, Direct Import sales are included in the United States segment. However, the revenues are earned by our Hong Kong subsidiary and related income taxes are paid in Hong Kong whose rate approximates 16.5%. As such, income of the Asian subsidiary is included in the foreign income before taxes.

The following schedule reconciles the amounts of income taxes computed at the United States statutory rates to the actual amounts reported in operations.

	2013			2012
Federal income taxes at 34% statutory rate	$	1,867,923		$	1,698,996
State and local taxes, net of federal income tax effect		73,587			75,697
Permanent items		61,750			79,892
Foreign tax rate difference		(515,729	)		(460,351	)
Change in deferred income tax valuation allowance		3,455			53,581
Provision for income taxes	$	1,490,986		$	1,447,815

The following summarizes deferred income tax assets and liabilities:

	2013			2012
Deferred income tax liabilities:
Plant, property and equipment	$	450,705		$	413,160
		450,705			413,160
Deferred income tax assets:
Asset valuations		508,686			543,002
Contribution carryforward		110,700			157,297
Operating loss carryforwards and credits		2,205,244			2,201,789
Pension		178,908			448,579
Foreign tax credit		43,575			43,575
Other		885,185			591,066
		3,932,298			3,985,308
Net deferred income tax asset before valuation allowance		3,481,593			3,572,148
Valuation allowance		(2,205,244	)		(2,201,789	)
Net deferred income tax asset	$	1,276,349		$	1,370,359

In 2013, the Company evaluated its tax positions for years which remain subject to examination by major tax jurisdictions, in accordance with the requirements of ASC 740 and as a result concluded no adjustment was necessary. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company’s evaluation of uncertain tax positions was performed for the tax years ended December 31, 2010 and forward, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2013.

In accordance with the Company’s accounting policies, any interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.

The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently reinvested. Earnings permanently reinvested would become taxable upon the sale or liquidation of a foreign subsidiary or upon the remittance of dividends. During 2013, the Company repatriated $350,000 of foreign earnings from its Canadian subsidiary. U.S. income taxes on those repatriated earnings have been partially offset by foreign tax credits. The Company plans to continue to repatriate future earnings of its Canadian subsidiary and will provide for U.S. income taxes accordingly. Foreign subsidiary earnings of $13,884,269 and $11,576,094 are considered permanently reinvested as of December 31, 2013 and 2012, respectively, and no deferred income taxes have been provided on these foreign earnings.

Due to the uncertain nature of the realization of the Company's deferred income tax assets based on past performance of its German subsidiary and carry forward expiration dates, the Company has recorded a valuation allowance for the amount of deferred income tax assets which are not expected to be realized. This valuation allowance, all of which is related to deferred tax assets resulting from net operating losses of the Company’s German subsidiary, is subject to periodic review, and if the allowance is reduced, the tax benefit will be recorded in future operations as a reduction of the Company's tax expense.

At December 31, 2013, the Company had tax operating loss carry forwards aggregating $7,120,173, all of which were applicable to Germany, and can be carried forward indefinitely.