Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

7.  Income Taxes

The amounts of income tax expense (benefit) reflected in operations is as follows:

	2012			2011
Current:
Federal	$	843,812		$	756,126
State		115,111			88,741
Foreign		523,752			532,827
		1,482,675			1,377,694
Deferred:
Federal		(31,374	)		(142,281	)
State		(4,685	)		(18,802	)
Foreign		1,199			(1,784	)
		(34,860	)		(162,867	)
	$	1,447,815		$	1,214,827

The current state tax provision was comprised of taxes on income, the minimum capital tax and other franchise taxes related to the jurisdictions in which the Company's facilities are located.

A summary of United States and foreign income before income taxes follows:

	2012		2011
United States	$	2,169,451	$	1,901,905
Foreign		2,827,595		2,124,115
	$	4,997,046	$	4,026,020

As discussed in Note 10 below, for segment reporting, Direct Import sales are included in the United States segment. However, the revenues are earned by our Hong Kong subsidiary and related income taxes are paid in Hong Kong whose rate approximates 16.5%.  As such, income of the Asian subsidiary is included in the foreign income before taxes.

The following schedule reconciles the amounts of income taxes computed at the United States statutory rates to the actual amounts  reported in operations.

	2012			2011
Federal income taxes at 34% statutory rate	$	1,698,996		$	1,368,847
State and local taxes, net of federal income tax effect		75,697			46,160
Permanent items		79,892			7,149
Foreign tax rate difference		(460,351	)		(308,250	)
Change in deferred income tax valuation allowance		53,581			100,921
Provision for income taxes	$	1,447,815		$	1,214,827

The following summarizes deferred income tax assets and liabilities:

	2012			2011
Deferred income tax liabilities:
Plant, property and equipment	$	413,160		$	322,604
		413,160			322,604
Deferred income tax assets:
Asset valuations		543,002			426,429
Contribution carryforward		157,297			296,802
Operating loss carryforwards and credits		2,201,789			2,148,208
Pension		448,579			467,087
Foreign tax credit		43,575			48,847
Other		591,066			418,938
		3,985,308			3,806,311
Net deferred income tax asset before valuation allowance		3,572,148			3,483,707
Valuation allowance		(2,201,789	)		(2,148,208	)
Net deferred income tax asset	$	1,370,359		$	1,335,499

In 2012, the Company evaluated its tax positions for years which remain subject to examination by major tax jurisdictions, in accordance with the requirements of ASC 740 and as a result concluded no adjustment was necessary. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company’s evaluation of uncertain tax positions was performed for the tax years ended December 31, 2009 and forward, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2012.

In accordance with the Company’s accounting policies, any interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.

The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently reinvested.  Earnings permanently reinvested would become taxable upon the sale or liquidation of a foreign subsidiary or upon the remittance of dividends.  During 2012, the Company repatriated $750,000 of foreign earnings from its Canadian subsidiary. U.S. income taxes on those repatriated earnings have been partially offset by foreign tax credits. The Company plans to continue to repatriate future earnings of its Canadian subsidiary and will provide for U.S. income taxes accordingly.  Foreign subsidiary earnings of $11,576,094 and $9,855,053 are considered permanently reinvested as of December 31, 2012 and 2011, respectively, and no deferred income taxes have been provided on these foreign earnings.

Due to the uncertain nature of the realization of the Company's deferred income tax assets based on past performance and carry forward expiration dates, the Company has recorded a valuation allowance for the amount of deferred income tax assets which are not expected to be realized.  This valuation allowance is subject to periodic review, and if the allowance is reduced, the tax benefit will be recorded in future operations as a reduction of the Company's tax expense.

At December 31, 2012, the Company had tax operating loss carry forwards aggregating $7,110,013, all of which were applicable to Germany, and can be carried forward indefinitely.