INCOME TAXES

The income tax expense (benefit) reconciled to the tax computed at the statutory Federal rate of 34% is as follows:



	Year Ended December 31,
	2012			2011			2010
Federal income tax expense (benefit) at statutory rate	$	(200,575	)	$	(71,686	)	$	303,010
State income taxes, net of federal benefit	6,490			674			5,529
Share-based compensation	10,682			11,253			15,306
Effect of foreign operations, net of foreign tax credits	9,404			(801		)	(9,957		)
Change in valuation allowance	(3,548		)	(2,127		)	91,537
Other, net	(50,943		)	(76,659		)	(71,964		)
Income tax expense (benefit)	$	(228,490	)	$	(139,346	)	$	333,461

Deferred tax assets and liabilities at December 31, 2012 and 2011 are comprised of the following:



	December 31,
	2012			2011
Deferred tax assets related to:
Inventories	$	365,087		$	374,307
Accounts receivable and other assets	9,596			10,276
Accrued liabilities	81,647			87,645
Tax loss and tax credit carryforwards	70,102			465,121
Other	21,965			14,074
	548,397			951,423
Valuation allowance	—			(408,131		)
Net deferred tax assets	548,397			543,292
Deferred tax liabilities related to:
Property and equipment	(596,290		)	(488,714		)
Intangible assets	(606,612		)	(601,687		)
Deferred tax liabilities	(1,202,902		)	(1,090,401		)
Net deferred tax liabilities	$	(654,505	)	$	(547,109	)

Net current deferred tax assets	$	462,088		$	460,868
Net long-term deferred tax liabilities	(1,116,593		)	(1,007,977		)
	$	(654,505	)	$	(547,109	)

The Company’s valuation allowance in 2011 relates to deferred tax assets of its Canadian subsidiary. In February 2013, the Canada Revenue Agency completed an audit of the Company's income tax returns for the period 2008-2011. As a result of that audit, the Company and the Canada Revenue Agency agreed to a change in the transfer pricing between the Company's US and Canadian subsidiaries. As a result, net operating losses of approximately $940,000 for the period 2008-2011 have been reversed, reducing deferred tax assets by approximately $376,000. Because of the history of operating losses in Canada, and the uncertainty related to recovery of the deferred tax assets, a valuation allowance for most of the Canadian deferred tax assets had been established. Accordingly, the write-off of these deferred tax assets did not significantly impact the Company's financial position or results of operations.

At December 31, 2012 and 2011, the Company had no unrecognized tax benefits. The Company’s policy is to record any interest and penalties related to gross unrecognized tax benefits within its provision for income taxes.

The Company files income tax returns in the U.S., Canada and Taiwan on a federal basis and in certain U.S. state jurisdictions. The most significant taxing jurisdiction is the U.S. federal jurisdiction. The Company’s 2009 through 2012 tax years remain subject to examination by the IRS for U.S. federal tax purposes. As of December 31, 2012, no tax years were under examination in any taxing jurisdiction except for tax years 2008 through 2011, which were reviewed by the Canada Revenue Agency, as more fully described above.

Income tax expense (benefit) for continuing operations consists of the following:



	Year Ended December 31,
	2012			2011			2010
Current
Federal	$	(353,064	)	$	(87,961	)	$	228,948
Foreign	10,206			—			—
Deferred
Federal	114,772			(51,385		)	104,513
Foreign	(404		)	—			—
Income tax expense (benefit)	$	(228,490	)	$	(139,346	)	$	333,461