INCOME TAXES

9 Months Ended

Sep. 30, 2012

INCOME TAXES

INCOME TAXES

NOTE 4.  INCOME TAXES

On a quarterly basis, we estimate what our effective tax rate will be for the full fiscal year and record a quarterly income tax provision based on the anticipated rate.  As the year progresses, we refine our estimate based on the facts and circumstances by each tax jurisdiction.  Our effective tax rate for the three months ended September 30, 2012 and 2011 was 35%.  The effective tax rate for the year ended December 31, 2012 is expected to be 36% compared to 32% for the year ended December 31, 2011.  The increase is principally due to the fact that the federal government has not yet extended the research and development credit for the 2012 tax year.

The differences between federal income taxes computed at the federal statutory rate and reported income taxes for the three and nine months ended September 30, 2012 and 2011 are as follows:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2012			2011			2012			2011
Statutory federal tax provision	$	61,000		$	96,000		$	186,000		$	473,000
State income taxes	2,000			8,000			18,000			41,000
Income tax credits	(4,000		)	(20,000		)	(10,000		)	(52,000		)
Tax authority closing agreement	—			—			—			(96,000		)
Change in uncertain tax positions	10,000			5,000			18,000			95,000
Other	(12,000		)	9,000			(20,000		)	(26,000		)
Income tax expense	$	57,000		$	98,000		$	192,000		$	435,000

At September 30, 2012, we had $136,000 of net uncertain tax benefit positions recorded in other long-term liabilities that would reduce our effective income tax rate if recognized.  The $18,000 increase from December 31, 2011 was mostly related to 2012 state research and experimentation credits.