18. INCOME TAXES

12 Months Ended

Oct. 31, 2012

Income Tax Disclosure [Abstract]

INCOME TAXES

18. INCOME TAXES

The following is the composition of income tax (benefit) expense:

	2012			2011
Current:
Federal	$	(573,358	)	$	189,581
State		75,280			129,026
Total current		(498,078	)		318,607
Deferred:
Federal		130,126			403,678
State		24,689			47,492
Total deferred		154,815			451,170
Total income tax (benefit) expense	$	(343,263	)	$	769,777

Deferred tax assets (liabilities) at October 31, 2012 and 2011, are as follows:

	2012			2011
Deferred tax assets:
Allowance for doubtful accounts	$	169,975		$	206,541
Accrued compensation		196,509			158,832
Accrued liabilities and reserves		4,323			62,694
Interest rate swaps		50,872			142,075
Capital loss carry forward		81,959			81,959
Subtotal		503,638			652,101
Valuation allowance		(81,959	)		(81,959	)
Total deferred tax assets		421,679			570,142
Deferred tax liabilities:
Depreciation		(2,634,394	)		(1,876,559	)
Amortization		(1,871,754	)		(2,532,034	)
Total deferred tax liabilities		(4,506,148	)		(4,408,593	)
Net deferred tax liability	$	(4,084,469	)	$	(3,838,451	)

The Company established a valuation allowance of $81,959 for both 2012 and 2011 related to the capital loss carry forward deferred tax asset.

Income tax expense (benefit) differs from the amount computed by applying the statutory tax rate to net income (loss) before income tax expense as follows:

	2012			2011
Income tax expense computed at the statutory rate	$	(6,399,064	)	$	766,803
State income taxes, net of federal benefit		65,980			116,502
Goodwill Impairment		5,973,924			-
Other differences		15,897			(113,528	)
Income tax (benefit) expense	$	(343,263	)	$	769,777

In fiscal year 2010, the Company recognized an increase to tax liability for uncertain tax positions of $137,000 related to a state income tax position taken in prior years and $11,000 of potential interest and penalty on another position taken.  This reserve was reversed in fiscal year 2011 as a result of a favorable final ruling on appeal of the position.

The results of the examination did not have a material effect on the Company’s unrecognized tax benefits, financial condition or results of operations.  The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. Generally, the Company is no longer subject to U.S. federal, state and local tax examinations by tax authorities for years before October 31, 2009.

A reconciliation of the beginning and ending amount of unrecognized tax benefits including interest and penalties is as follows:

Balance at October 31, 2010	$	177,000
Increases related to current year tax positions		-
Increases related to the prior year tax positions		9,000
Decreases related to prior year tax positions		-
Settlements		(145,000	)
Expiration of Statutes		-
Balance at October 31, 2011	$	41,000
Increases related to current year tax positions		-
Increases related to the prior year tax positions		-
Decreases related to prior year tax positions		-
Settlements		-
Expiration of Statutes		-
Balance at October 31, 2012	$	41,000

The Company recognizes interest and penalties related to the unrecognized tax benefits in tax expense.  During the year ended October 31, 2011 the Company reduced its accrued interest and penalties by $29,000. The Company had approximately $41,000 of interest and penalties accrued at October 31, 2012 and 2011.