NOTE 4. INCOME TAXES

On a quarterly basis, we estimate what our effective tax rate will be for the full fiscal year and record a quarterly income tax provision based on the anticipated rate. As the year progresses, we refine our estimate based on the facts and circumstances, including discrete events, by each tax jurisdiction. Our effective tax rate for the three months ended March 31, 2014 was 37%, compared with (17%) for the three months ended March 31, 2013. The tax benefit in the first quarter of 2013 was the result of the federal government reinstating the research and development credit for the 2012 tax year and extending it to 2013. The effective tax rate for the year ended December 31, 2014 is expected to be 37% compared to 28% for the year ended December 31, 2013. The increase is primarily the result of the federal government not extending the research and development credit for the 2014 tax year as well as the retroactive credits allowed in 2013 related to 2012 research and development activities as noted above.

The differences between federal income taxes computed at the federal statutory rate and reported income taxes for the three months ended March 31, 2014 and 2013 are as follows:

	Three Months Ended
	March 31
	2014			2013
Statutory federal tax provision	$	51,000		$	43,000
State income taxes	7,000			10,000
Income tax credits	(8,000		)	(86,000		)
Change in uncertain tax positions	—			14,000
Other	—			(2,000		)
Income tax expense (benefit)	$	50,000		$	(21,000	)

At March 31, 2014, we had $193,000 of net uncertain tax benefit positions recorded in other long-term liabilities that would reduce our effective income tax rate if recognized.