8. Income Taxes

Deferred income taxes are provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and those for income tax reporting purposes. Deferred income tax (assets) liabilities relate to:

	2011			2010			2009
Property, plant and equipment	$	5,480,102		$	4,546,941		$	3,984,625
Total deferred income tax liabilities		5,480,102			4,546,941			3,984,625

Other postretirement benefits		(653,238	)		(515,133	)		(472,878	)
Inventories		(1,005,134	)		(747,397	)		(688,253	)
Allowance for doubtful accounts		(94,120	)		(126,593	)		(93,386	)
Intangible assets		(472,243	)		(429,749	)		(409,233	)
Accrued compensation		(224,155	)		(258,631	)		(294,464	)
Pensions		(5,573,596	)		(4,338,664	)		(4,248,502	)
Other		(160,876	)		(184,561	)		(191,130	)
Total deferred income tax assets		(8,183,362	)		(6,600,728	)		(6,397,846	)
Net deferred income tax assets	$	(2,703,260	)	$	(2,053,787	)	$	(2,413,221	)

Income before income taxes consists of:

	2011		2010		2009
Domestic	$	5,180,467	$	6,173,597	$	2,274,641
Foreign		3,326,462		2,074,821		(373,112	)
	$	8,506,929	$	8,248,418	$	1,901,529

The provision for income taxes follows:

	2011		2010		2009
Current:
Federal	$	214,988	$	1,543,735	$	505,005
Foreign		830,028		403,115		(128,177	)
State		109,711		232,390		252,506
Deferred:
Federal		1,747,620		497,815		264,227
Foreign		-		-		-
State		99,652		28,358		(28,439	)
	$	3,001,999	$	2,705,413	$	865,122

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:

	2011						2010						2009
	Amount			Percent			Amount			Percent			Amount			Percent
Income taxes using U.S. federal statutory rate	$	2,892,356			34	%	$	2,804,462			34	%	$	646,520			34	%
State income taxes, net of federal benefit		133,201			2			153,535			2			149,893			8
Impact of foreign subsidiaries on effective tax rate		21,329			-			38,813			1			173,415			9
Impact of manufacturers deduction on effective tax rate		(50,537	)		(1	)		(176,847	)		(2	)		(68,174	)		(4	)
Other-net		5,650			-			(114,550	)		(2	)		(36,532	)		(2	)
	$	3,001,999			35	%	$	2,705,413			33	%	$	865,122			45	%

Total income taxes paid were $1,631,299 in 2011, $2,466,998 in 2010 and $645,976 in 2009.

United States income taxes have been provided on the undistributed earnings of foreign subsidiaries ($13,701,360 at December 31, 2011) only where necessary because such earnings are intended to be reinvested abroad indefinitely or repatriated only when substantially free of such taxes.

During 2011, 2010 and 2009, the Company received tax benefits of $106,000, $108,000 and $203,000, respectively, as a result of the exercise and sale of incentive stock options that resulted in the disqualification of those incentive stock options, and the exercise of non-qualified stock options during the year. The tax benefit associated with the exercise of the incentive and non-qualified stock options has been recorded to common stock.

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

	2011			2010			2009

Balance at beginning of year	$	495,843		$	791,540		$	1,316,240
Decrease for tax positions taken during a prior period		-			-			(3,651	)
Increases for positions taken during the current period		25,398			30,876			118,786
Decreases relating to settlements		-			(56,360	)		(408,000	)
Decreases resulting from the expiration of the statute of limitations		(34,909	)		(270,213	)		(231,835	)
Balance at end of year	$	486,332		$	495,843		$	791,540

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2008 and non-U.S. income tax examinations by tax authorities prior to 2005.

Included in the balance at December 31, 2011, are $183,306 of unrecognized tax benefits that would affect the annual effective tax rate. In 2011, the Company recognized accrued interest related to unrecognized tax benefits in income tax expense. The Company had approximately $169,000 of accrued interest at December 31, 2011.

The total amount of unrecognized tax benefits could increase or decrease within the next twelve months for a number of reasons, including the closure of federal, state and foreign tax years by expiration of the statute of limitations and the recognition and measurement considerations under ASC 740. The Company believes that the total amount of unrecognized tax benefits will not increase or decrease significantly over the next twelve months.