Note 3 - Income Taxes

12 Months Ended

Sep. 30, 2011

Income Tax Disclosure [Text Block]

3.  INCOME TAXES

The provision for income taxes consists of the following:

	2011		2010
Current:
Federal	$	3,069,000	$	3,936,000
State		902,000		1,087,000
		3,971,000		5,023,000
Deferred:
Federal		162,000		(352,000	)
State		27,000		(71,000	)
		189,000		(423,000	)
	$	4,160,000	$	4,600,000

The difference between the statutory federal income tax rate and the Company’s effective rate is summarized below:

	2011			2010
Statutory federal income tax rate		34.1	%		34.1	%
State franchise taxes (net of federal tax benefit)		5.8			5.8
Other, primarily dividends received deduction and    domestic production activity deduction		(5.2	)		(2.4	)
Effective tax rate		34.7	%		37.5	%

At September 30, 2011, the Company’s deferred income tax liabilities were comprised of the following:

	2011			2010
Deferred tax assets attributable to:
Accrued liabilities, including supplemental   compensation and vacation pay accrual	$	2,307,000		$	2,497,000
Bad debt reserves not yet deductible		100,000			120,000
Depreciation and amortization		369,000			348,000
Other		306,000			306,000
Total deferred tax assets		3,082,000			3,271,000
Deferred tax liabilities attributable to:
Unrealized gains on  investments		(9,772,000	)		(11,269,000	)
Net deferred income taxes	$	(6,690,000	)	$	(7,998,000	)

The Company files federal income tax returns in the United States and with various state jurisdictions and is no longer subject to examinations for years before 2002 as well as for years 2008 and 2009 with regards to federal income taxes.  The Internal Revenue Service has been examining the Company’s tax returns for years 2002 to 2007 and has proposed an assessment that, if upheld, would result in disallowance of about $700,000 of previously claimed research and development credits.  The Company is continuing to contest the issue in the United States Tax Court, and the ultimate resolution of this dispute cannot be ascertained at this time.  At September 30, 2011 and 2010, the Company had a reserve of approximately $700,000 pertaining to these claimed research and development tax credits.  If these benefits are recognized, there would be an impact on the effective tax rate in the period of recognition.  Interest accrued related to unrecognized tax benefits is recorded as interest expense, and as of September 30, 2011 and 2010, the Company had accrued $286,000 and $250,000, respectively, including an additional $36,000 during each of fiscal 2011 and 2010. The Company has not accrued the penalties related to any potential assessment.