INCOME TAXES

12 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 10. INCOME TAXES

Provisions for income taxes for the years ended September 30, 2012 and 2011 are summarized below:

	Years Ended
Income Tax Provision		September 30, 2012		September 30, 2011
	(thousands)
Current tax expense:
State		$	205	$	2
Federal			216		134
Deferred tax expense:
State			77		(388	)
Federal			3,756		3,308
Provision for income taxes		$	4,254	$	3,056

Differences between the federal statutory rate and IEC's effective rates of tax for 2012 and 2011 are explained by the following reconciliation.

	Years Ended
Taxes as Percent of Pretax Income	September 30, 2012			September 30, 2011
Federal statutory rate		34.0	%		34.0	%
State income taxes, net of federal benefit		2.4			2.4
Tax credit expiration and related valuation allowance		0.0			(2.3	)
Increases in tax credits		(0.7	)		(3.7	)
Other		(0.3	)		0.7
Income tax provision as percent of pretax income		35.4	%		31.1	%

The following table displays deferred tax assets/liability by category as of September 30, 2012 and 2011. Recorded amounts include the establishment of deferred taxes for acquired companies.

	September 30,
Deferred Income Taxes	2012			2011
	(thousands)
Deferred tax assets:
Net operating loss carryforward	$	4,483		$	8,853
Alternative minimum tax credit carryforward		831			503
Depreciation and fixed assets		(205	)		(93	)
New York State investment tax & other credits		990			904
Inventories		535			403
Other		1,091			723
Total before allowance		7,725			11,293
Valuation allowance		(455	)		(455	)
Deferred tax assets, net		7,270			10,838
Deferred tax liability:
Amortization of intangibles		(472	)		(207	)
Net deferred income taxes (current and deferred)	$	6,798		$	10,631

IEC has federal and state net operating loss carryforwards (“NOLs”) for income tax purposes of approximately $11.9 million and $24.9 million, respectively, as of September 30, 2012, expiring mainly in years 2020 through 2025. It is estimated that the federal and state NOLs will produce future tax benefits totaling $4.5 million.

In addition, $1.0 million of New York State investment tax and other credits are available to the Company as carryforwards, expiring in various years through 2026. These credits cannot be utilized until the New York net operating loss carryforward is exhausted. We have recorded a valuation allowance for these credits to the extent that we believe it is more likely than not that the tax benefit will not be realized. If the credits expire unused, the related deferred tax asset and offsetting valuation allowance will be reduced.