NOTE 7. INCOME TAXES
Income tax provisions for fiscal 2010 through 2012 consisted of the following:

	Year Ended March 31
	2012			2011		2010
Current taxes
Federal	$	4,847,082		$	5,761,632	$	5,375,724
State	407,913			504,408		550,146
Deferred taxes
Federal	(17,233		)	56,996		(6,109		)
State	4,382			7,215		(2,689		)
Income tax provision	$	5,242,144		$	6,330,251	$	5,917,072

A reconciliation of income tax provisions at the U.S. statutory rate for fiscal 2010 through 2012 is as follows:

	Year Ended March 31
	2012			2011			2010
Tax expense at U.S. statutory rate	$	5,700,630		$	6,809,003		$	6,091,581
State income taxes, net of Federal benefit		252,881			345,213			369,754
Domestic manufacturing deduction		(467,053	)		(549,123	)		(309,222	)
Municipal interest		(235,470	)		(239,636	)		(225,695	)
Other		(8,844	)		(35,206	)		(9,346	)
Income tax provision	$	5,242,144		$	6,330,251		$	5,917,072

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of March 31, 2012 and 2011 were as follows:

	March 31
	2012			2011
Vacation accrual	$	126,453		$	135,724
Inventory reserve	108,990			110,400
Depreciation	9,245			36,053
Stock-based compensation deductions	145,418			117,800
Unrealized gain on marketable securities	(620,500		)	(617,471		)
Other	93,522			70,801
Net deferred tax liabilities	$	(136,872	)	$	(146,693	)

     Realizations of stock-based compensation deductions are credited to "Additional paid-in capital" and included in "Tax benefit of stock-based compensation" on our statements of shareholders' equity. Credits of $230,173 in fiscal 2011, and $280,448 in fiscal 2010 were attributed to stock-based compensation deductions. The "Additional paid-in capital" credits also included the tax benefit of stock-based compensation deductions in those years.

     The amounts credited to "Additional paid-in capital" were the tax benefits of the deductions to the extent they exceeded the corresponding compensation expense recognized for financial reporting purposes. "Tax benefit of stock-based compensation" represented the tax benefits of deductions for stock-based compensation to the extent they exceeded the corresponding compensation expense recognized for financial reporting purposes. Cash we received from the exercise of stock options related to excess tax benefits is included in "Net proceeds from sale of common stock" in the statement of cash flows for the year in which the option was exercised and cash received.

     We had $149,284 of Federal net operating losses and $155,681 of state net operating losses at March 31, 2012, compared to $203,384 of Federal net operating losses and $166,729 of state net operating losses at March 31, 2011. These net operating losses expire in fiscal 2020 and are subject to limitation including limitation under the Internal Revenue Code.

     We had no unrecognized tax benefits as of March 31, 2012, and we do not expect any significant unrecognized tax benefits within 12 months of the reporting date. We recognize interest and penalties related to income tax matters in income tax expense. As of March 31, 2012 we had no accrued interest related to uncertain tax positions. The tax years 1999 through 2011 remain open to examination by the major taxing jurisdictions to which we are subject.