NOTE 7. INCOME TAXES
Income tax provisions for fiscal 2012 through 2014 consisted of the following:


	Year Ended March 31
	2014		2013		2012
Current taxes
Federal	$	5,010,734	$	5,314,876	$	4,847,082
State	304,931		377,215		407,913
Deferred taxes
Federal	61,306		34,718		(17,233		)
State	3,103		810		4,382
Income tax provision	$	5,380,074	$	5,727,619	$	5,242,144

A reconciliation of income tax provisions at the U.S. statutory rate for fiscal 2012 through 2014 is as follows:


	Year Ended March 31
	2014			2013			2012
Tax expense at U.S. statutory rate	$	5,667,281		$	6,046,264		$	5,700,630
State income taxes, net of Federal benefit		199,751			244,691			252,881
Domestic manufacturing deduction		(443,708	)		(460,723	)		(467,053	)
Municipal interest		(28,456	)		(118,282	)		(235,470	)
Other		(14,794	)		15,669			(8,844	)
Income tax provision	$	5,380,074		$	5,727,619		$	5,242,144

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, 2014 and 2013 were as follows:


	March 31
	2014			2013
Vacation accrual	$	137,052		$	134,214
Inventory reserve	107,173			103,540
Depreciation	(37,131		)	(4,756		)
Stock-based compensation deductions	120,009			145,592
Unrealized gain on marketable securities	(500,904		)	(888,836		)
Other	56,588			69,510
Net deferred tax liabilities	$	(117,213	)	$	(440,736	)
Reported as:
Deferred tax assets	$	237,387		$	-
Deferred taxes		-			(440,736	)
Long-term deferred tax liabilities		(354,600	)		-
Net deferred tax liabilities	$	(117,213	)	$	(440,736	)

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 $57,472 in fiscal 2014 and $15,734 in fiscal 2013 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 $41,084 of Federal net operating losses and $131,596 of state net operating losses at March 31, 2014, compared to $95,184 of Federal net operating losses and $142,775 of state net operating losses at March 31, 2013. 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, 2014, 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, 2014 we had no accrued interest related to uncertain tax positions. The tax years 1999 through 2013 remain open to examination by the major taxing jurisdictions to which we are subject.