9. INCOME TAXES

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

9. INCOME TAXES

The Company accounts for income taxes in accordance with the accounting standard for “Income Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred income taxes have been provided for the temporary differences between the financial reporting and the income tax basis of the Company’s assets and liabilities by applying enacted statutory tax rates applicable to future years to the basis differences.

A breakdown of our income tax expense is as follows:

	Years Ended December 31,
	2014		2013			2012
Federal:
Current	$	3,656,356	$	2,540,701		$	3,946,096
Deferred		848,666		778,213			307,639
Total Federal		4,505,022		3,318,914			4,253,735
State & local:
Current		203,144		109,254			26,073
Deferred		140,552		(29,619	)		(242,227	)
Total State & local		343,696		79,635			(216,154	)
Foreign
Current		46,911		42,450			197,538
Deferred		255		1,769			(2,465	)
Total Foreign		47,166		44,219			195,073
Total	$	4,895,884	$	3,442,768		$	4,232,654

A reconciliation of recorded Federal income tax expense to the expected expense computed by applying the applicable Federal statutory rate for all periods to income before income taxes follows:

	Years Ended December 31,
	2014			2013			2012
Expected expense at statutory rate	$	5,147,234		$	3,775,418		$	4,523,826
Increase (decrease) in income taxes resulting from:
Exempt income from Dominican Republic operations due to tax holiday		(3,477,301	)		(1,871,847	)		(1,180,971	)
Tax on repatriated earnings from Dominican Republic operations		3,090,036			1,592,238			879,884
Impact of Canadian deemed dividend		12,703			9,712			57,847
State and local income taxes		284,838			45,948			(203,178	)
Section 199 manufacturing deduction		(135,690	)		(51,396	)		(62,704	)
Meals and entertainment		91,475			76,465			59,092
Nondeductible penalties		1,563			1,500			4,614
Provision to return filing adjustments and other		(118,974	)		(135,270	)		154,244
Total	$	4,895,884		$	3,442,768		$	4,232,654

Deferred income taxes recorded in the consolidated balance sheets at December 31, 2014 and 2013 consist of the following:

	December 31,
	2014			2013
Deferred tax assets:
Asset valuation allowances and accrued expenses	$	776,416		$	1,094,449
Inventories		705,028			735,528
State and local income taxes		394,776			345,583
Pension and deferred compensation		80,969			94,599
Net operating losses		575,702			565,088
Total deferred tax assets		2,532,891			2,835,247
Valuation allowances		(569,881	)		(562,776	)
Total deferred tax assets		1,963,010			2,272,471
Deferred tax liabilities:
Fixed assets		(1,736,042	)		(875,542	)
Intangible assets		(11,001,289	)		(11,192,160	)
Other assets		(482,549	)		(472,166	)
Tollgate tax on Lifestyle earnings		(379,271	)		(379,271	)
Total deferred tax liabilities		(13,599,151	)		(12,919,139	)
Net deferred tax liability	$	(11,636,141	)	$	(10,646,668	)
Deferred income taxes - current	$	1,291,907		$	1,104,050
Deferred income taxes - non-current		(12,928,048	)		(11,750,718	)
	$	(11,636,141	)	$	(10,646,668	)

The valuation allowance is related to certain state and local income tax net operating loss carry forwards.

We have provided Puerto Rico tollgate taxes on approximately $3,684,000 of accumulated undistributed earnings of Lifestyle prior to the fiscal year ended June 30, 1994, that would be payable if such earnings were repatriated to the United States. In 2001, we received abatement for Puerto Rico tollgate taxes on all earnings subsequent to June 30, 1994, thus no other provision for tollgate tax has been made on earnings after that date. If we repatriate the earnings from Lifestyle, approximately $379,000 of tollgate tax would be due.

As of December 31, 2014, we had approximately $17,598,000 of undistributed earnings from non-U.S. subsidiaries that are intended to be permanently reinvested in non-U.S. operations. Because these earnings are considered permanently reinvested, no U.S. tax provision has been accrued related to the repatriation of these earnings. If the Five Star undistributed earnings were distributed to the Company in the form of dividends, the related taxes on such distributions would be approximately $6,159,000.

We file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. We are no longer subject to U.S. Federal tax examinations for years before 2012. In 2014, we were subjected to an IRS examination for our consolidated U.S. Federal return for the year 2011. There were no adjustments to our return as a result of that examination. State jurisdictions that remain subject to examination range from 2010 to 2014. Foreign jurisdiction (Canada and Puerto Rico) tax returns that remain subject to examination range from 2009 to 2014.

Our policy is to accrue interest and penalties on any uncertain tax position as a component of income tax expense. As of December 31, 2014 no such expenses were recognized during the year. We do not believe there will be any material changes in our uncertain tax positions over the next 12 months.

Accounting for uncertainty in income taxes requires financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.  Under this guidance, income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of the standard.  The Company did not have any unrecognized tax benefits and there was no effect on its financial condition or results of operations as a result of implementing this standard.