
	INCOME TAXES

The Company follows the provisions of the Financial Accounting Standards Codification 740 (“ASC 740”), “Accounting for Uncertainty in Income Taxes.” A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	2012		2011			2010
Beginning of year	$	2,476,000	$	2,483,000		$	2,411,000
Additions based on tax positions related to the current year	785,000		1,105,000			900,000
Additions for tax positions in prior years	907,000		208,000			76,000
Reductions for tax positions in prior years	—		(78,000		)	(35,000		)
Reductions as a result of completed audit examinations	—		(1,242,000		)	—
Reductions as a result of a lapse of the applicable statute of limitations	—		—			(869,000		)
End of year	$	4,168,000	$	2,476,000		$	2,483,000

If recognized, unrecognized tax benefits would affect the effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits through the provision for income taxes. The Company has accrued approximately $250,000 and $95,000 for interest as of December 31, 2012 and 2011, respectively. Interest recorded during 2012, 2011 and 2010 was not considered significant.

During 2011, the Company completed a routine audit examination with the Internal Revenue Service for tax years prior to 2010. As a result, unrecognized federal tax benefits pertaining to audited tax years prior to 2010 were reversed as of December 31, 2011. The Company is also subject to other periodic and routine audits in both domestic and foreign tax jurisdictions, and it is reasonably possible that the amounts of unrecognized tax benefits could change as a result of an audit. Based on the current audits in process, the payment of taxes as a result of audit settlements and the completion of tax examinations are not expected to have a significant impact on the Company’s financial position or results of operations.

For the majority of tax jurisdictions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2008.

In May 2011, the State of Michigan enacted a new Corporate Income Tax that was effective January 1, 2012. The new Corporate Income Tax does not have a significant effect on the Company’s consolidated financial position or results of operations.

In January 2013, the American Taxpayer Relief Act of 2012 was signed into law and reinstated retroactively to January 1, 2012 various tax provisions known as tax "extenders" that had expired as of December 31, 2011. In accordance with ASC 740-45-15, the effects of changes in tax rates and laws on deferred tax balances and tax rates are recognized in the period the new legislation is enacted. As a result, the impact of the new legislation will be reflected in the Company's consolidated financial position and results of operations in calendar year 2013.

The provision for income taxes is based on the earnings reported in the accompanying consolidated financial statements. The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred income tax liabilities and assets are determined based on the cumulative temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. Deferred income tax expense is measured by the net change in deferred income tax assets and liabilities during the year.

The foreign components of income before the provision for income taxes were not material as of December 31, 2012. As a result, the domestic and foreign components of income before the provision for income taxes are not detailed in the income tax footnote.

The components of the provision for income taxes are as follows:



	2012		2011		2010
Currently payable:
Federal	$	76,507,760	$	63,307,583	$	54,032,045
State	2,450,000		1,663,000		789,000
Foreign	1,238,000		850,000		494,000
Total	80,195,760		65,820,583		55,315,045
Net deferred:
Primarily federal	843,000		13,943,000		10,391,000
Provision for income taxes	$	81,038,760	$	79,763,583	$	65,706,045

The currently payable provision is further reduced by the tax benefits associated with the exercise, vesting or disposition of stock under the stock plans described in Note 5. These reductions totaled approximately $1,457,000, $7,879,000 and $7,832,000 in 2012, 2011 and 2010, respectively, and were recognized as an adjustment of additional paid-in capital.

The effective income tax rates are different from the statutory federal income tax rates for the following reasons:



	2012		2011		2010
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	0.6		0.1		0.2
Domestic production exclusion	(2.9	)	(2.3	)	(2.5	)
Other	(0.2	)	(0.2	)	(0.4	)
Effective income tax rate	32.5	%	32.6	%	32.3	%

The tax effect of temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2012 and 2011, are as follows:



	2012						2011
	Current			Non-Current			Current			Non-Current
Assets:
Accruals not currently deductible	$	3,721,183		$	186,997		$	2,465,349		$	152,716
Stock based compensation	12,044,953			1,696,966			8,730,729			1,473,236
Impairment loss on available-for-sale securities	—			327,308			—			471,401
Other	5,690,130			3,609			4,874,704			3,809
Total deferred income tax assets	21,456,266			2,214,880			16,070,782			2,101,162
Liabilities:
Excess tax over book depreciation	—			(47,704,521		)	—			(41,681,342		)
Patent costs	—			(8,137,111		)	—			(5,606,595		)
Unrealized gain on investments	—			(3,146,585		)	—			(3,027,206		)
Other	(527,417		)	—			(327,490		)	—
Net deferred income taxes	$	20,928,849		$	(56,773,337	)	$	15,743,292		$	(48,213,981	)

Income taxes paid in cash were approximately $63,351,000, $63,483,000 and $63,557,000 in 2012, 2011 and 2010, respectively.

No provision has been made for U.S. Federal and State income taxes on foreign taxes that may result from remittances of undistributed earnings of foreign subsidiaries as of December 31, 2012. The Company expects such earnings will remain reinvested in those foreign subsidiaries indefinitely. Undistributed foreign earnings were not material as of December 31, 2012.