INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES

INCOME TAXES

12. INCOME TAXES

The provision (benefit) for income taxes for continuing operations is summarized as follows (amounts in thousands):

		2011			2010
Federal:	Current	$	9		$	39
	Deferred	(1,000		)	(279		)
State:	Current	11			9
	Deferred	(174		)	(55		)
		$	(1,154	)	$	(286	)

Note that the percentage effect of an item on the statutory tax rate in a given year will fluctuate based upon the magnitude of the pre-tax profit or loss in that year. The difference between the tax rate for continuing operations on income or loss for financial statement purposes and the federal statutory tax rate was as follows:

	2011		2010
Statutory tax rate	(34.0	)%	(34.0	)%
Percentage depletion	(1.9	)	(16.9	)
Non-deductible expenses	1.1		4.9
Change in uncertain tax positions	.1		.5
Valuation allowance for tax assets	(.8	)	7.0
State income taxes, net of federal benefit	(4.2	)	(5.2	)
Federal benefit of AMT carry forward	.9		—
Federal benefit of loss carryback	—		(6.3	)
Other	.7		(.2	)
	(38.1	)%	(50.2	)%

For financial statement purposes, deferred tax assets and liabilities are recorded at a blend of the current statutory federal and states’ tax rates — 37.96%. The principal temporary differences and their related deferred taxes are as follows (amounts in thousands):

	2011			2010
Reserves for self-insured losses	$	729		$	803
Accrued reclamation	437			457
Unfunded supplemental profit sharing plan liability	279			299
Asset valuation reserves	400			295
Future state tax credits	826			824
Net state operating loss carryforwards	270			216
Federal AMT carryforward	334			363
Federal NOL carryforward	147			—
Capitalized organization costs	335			—
Approximate long-term capital loss carryforward	1,474			1,474
Other	1,213			1,157
Valuation allowance	(1,787		)	(1,807		)
Total deferred tax assets	4,657			4,081
Depreciation	1,548			2,113
Deferred development	492			558
Prepaid royalty	625			537
Other	547			613
Total deferred tax liabilities	3,212			3,821
Net deferred tax asset (liability)	$	1,445		$	260

At both December 31, 2011 and January 1, 2011, the Company established a valuation reserve of $304,000 and $269,000, respectfully, related to the carry forward of charitable contributions deductions arising in the current and prior years due to the uncertainty that the Company will be able to utilize these deductions prior to the expiration of their carry forward periods. At January 2, 2010, the Company also established a valuation reserve related to the carry forward of the long-term capital loss related to the sale of the stock of RMRM due to the uncertainty that the Company will be able to generate offsetable long-term capital gains prior to the expiration of the carry forward period. At December 31, 2011 the reserve is approximately $1,474,000. Lastly, the Company established a valuation reserve of $9,000 related to the carry forward of a net operating loss in a state that limits the carry forward to a five-year period. For Federal purposes, Alternative Minimum Tax credits can be carried forward indefinitely. For State purposes, Net Operating Losses can be carried forward for periods ranging from 5 to 20 years for the states that the Company is required to file in. Of the $826,000 of recorded state tax credits, $760,000 relates to California Enterprise Zone hiring credits earned in prior years. These credits may be carried forward indefinitely.

The realization of the deferred tax assets, including net operating loss carry forwards, is subject to our ability to generate sufficient taxable income during the periods in which the temporary differences become realizable. In evaluating whether a valuation allowance is required, we consider all available positive and negative evidence, including prior operating results, the nature and reason of any losses, our forecast of future taxable income and the dates on which any deferred tax assets are expected to expire. These assumptions require a significant amount of judgment, including estimates of future taxable income. The estimates are based on our best judgment at the time made based on current and projected circumstances and conditions.

As a result of the evaluation of the realizability of our deferred tax assets as of December 31, 2011, we concluded that it was more likely than not that all of our deferred tax assets would be realized to the extent not reserved for by a valuation allowance.

The net current deferred tax assets are $1,625,000 and $1,584,000 at year-end 2011 and 2010, respectively. The Company accounts for uncertainty in income taxes recognized in its financial statements by applying GAAP’s recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The financial statement effects of a tax position are initially recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon effective settlement with a taxing authority.

The gross amount of unrecognized tax benefits at December 31, 2011 was $51,000 compared to $53,000 at January 1, 2011. Of these totals, none of these amounts would affect the effective tax rates.

We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. Accrued interest of $38,000 and penalties of $0 were included in our total liability for unrecognized tax benefits as of December 31, 2011 compared to interest of $37,000 and penalties of $0 as of January 1, 2011.

We file income tax returns in the United States Federal and various state jurisdictions. The Internal Revenue Service has completed examinations for periods through 2007. Federal tax years 2008 and on remain subject to examination. Various state income tax returns also remain subject to examination. There are no tax positions expected to be resolved within 12 months of this reporting date.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in thousands):

	2011			2010
Balance at Beginning of Year	$	53		$	47
Additions for tax positions related to the current year	51			53
Reductions for statute of limitations	—			—
Reductions for tax positions of prior years	(53		)	(47		)
Settlements	—			—
Balance at End of Year	$	51		$	53