(7) INCOME TAXES

The domestic and foreign components of income before tax for our operations for the years ended December 31 are summarized below:

	2012		2011		2010
Domestic	$	7,716	$	12,550	$	4,896
Foreign	8,836		4,260		1,492

	$	16,552	$	16,810	$	6,388

The components of the provision for income taxes for the years ended December 31 are as follows:

	2012			2011			2010
Current - Federal	$	3,774		$	4,260		$	2,089
Current - State	148			137			(68		)
Current - Foreign	2,203			1,559			820

	6,125			5,956			2,841

Deferred - Federal	(314		)	(295		)	(376		)
Deferred - State	(21		)	(24		)	25
Deferred - Foreign
Net operating losses	176			71			(784		)
Other	(1,108		)	(1,339		)	(573		)

	(1,267		)	(1,587		)	(1,708		)

	$	4,858		$	4,369		$	1,133

A reconciliation of our income tax provision computed by applying the Federal statutory income tax rate of 35% in 2012, 2011, and 2010 to income before taxes for the years ended December 31 is as follows:

	2012			2011			2010
Federal income tax at statutory rate	$	5,793		$	5,900		$	2,240
State and local tax items not included below, net	431			209			(185		)
Effect of difference between U.S. Federal and foreign tax rates	(1,459		)	(554		)	261
Permanent differences:
Foreign interest expense	(859		)	(784		)	(651		)
U.S. manufacturing tax deduction	(356		)	(414		)	(117		)
Deemed repatriation of foreign earnings	914			—			—
Book gain on step acquisition of joint ventures	—			—			(453		)
Other	326			279			148
Current year tax credits	(29		)	(142		)	(12		)
Impact of statutory tax rate change	198			(31		)	(36		)
Other	(101		)	(94		)	(62		)

Provision for income taxes	$	4,858		$	4,369		$	1,133

In January 2013, the United States Congress authorized, and the President signed into law, certain federal tax credits that can be reflected in our U.S. tax return for 2012; however, since this law was enacted in 2013, the financial statement benefit of such credits cannot be reflected until the first quarter of 2013. The lack of availability of such credits caused the 2012 effective tax rate to be approximately 5.5% higher than it would have been had the credits been approved in 2012.

Our deferred tax assets and liabilities at December 31, 2012 and 2011 consist of the following:

	2012			2011
Deferred tax assets:
Income tax credit carryforward	$	584		$	1,015
Net foreign operating loss carryforward	6,019			6,196
Inventory differences	1,451			1,011
Allowance for doubtful accounts	113			111
Equity compensation	1,703			1,813
Vacation and other compensation accrual	420			261
Other, net	21			16

Deferred tax assets	10,311			10,423

Deferred tax liabilities:
Purchased intangible assets	(13,257		)	(14,027		)
Depreciation and amortization	(2,097		)	(2,469		)
Investment in partnerships	(1,129		)	(1,843		)
Deferred profit	(236		)	(383		)
Other, net	(74		)	—

Deferred tax liabilities	(16,793		)	(18,722		)

Net deferred tax liabilities	$	(6,482	)	$	(8,299	)

Current deferred tax assets	$	2,074		$	1,469
Current deferred tax liabilities	(149		)	(68		)
Long-term deferred tax assets	804			485
Long-term deferred tax liabilities	(9,211		)	(10,185		)

Net deferred tax liabilities	$	(6,482	)	$	(8,299	)

As a result of stock-based compensation in 2012, 2011, and 2010, we decreased additional paid-in-capital by $453, $35, and $601, respectively, for the tax impact. To the extent these adjustments reduced taxes currently payable, they are not reflected in the current income tax provision for those years.

As of December 31, 2012, 2011 and 2010, income considered to be permanently reinvested in non-U.S. subsidiaries totaled approximately $42,543, $27,745 and $16,514, respectively. Deferred income taxes have not been provided on this undistributed income, as we do not plan to initiate any action that would require the payment of U.S. income taxes on these earnings. It is not practical to estimate the amount of additional taxes that might be payable on these amounts of undistributed foreign income.

The components of the income tax credit carryforward as of December 31, 2012 are U.S. foreign tax credits of $551 (which, if unused, expire between 2017 and 2019) and sundry state tax credits of $33 (which, if unused, expire between 2013 and 2017). The components of the income tax credit carryforward as of December 31, 2011, are U.S. foreign tax credits of $971 (which, if unused, expire between 2013 and 2019) and sundry state tax credits of $44 (which, if unused, expire beginning in 2012 and 2019).

As of December 31, 2012 and 2011, we had no state net operating loss carryforwards. The foreign loss carryforwards are primarily from jurisdictions which do not impose a time limitation on such carryforwards.

At December 31, 2012 and 2011, the balance of unrecognized tax benefits was $0. We recognize interest and penalties related to uncertain tax positions in operating expense. As of December 31, 2012 and 2011, our accrual for interest and penalties related to uncertain tax positions was $0.

DMC’s U.S. Federal tax returns for the tax years 2009-2012 remain open to examination while most of DMC’s state tax returns remain open to examination for the tax years 2008-2012. DMC’s foreign tax returns remain open to examination for the tax years 2007-2012.