Note M - Income Taxes

9 Months Ended

Sep. 30, 2011

Income Tax Disclosure [Text Block]

Note M:   Income Taxes

The Company’s effective tax rates of 29.8% and 46.5% for the nine-month periods ended September 30, 2011 and 2010, respectively, differ from the statutory federal tax rate due primarily to state taxes, stock-based compensation, differences between U.S. and foreign tax rates, foreign losses incurred with no related tax benefit, changes in state tax rates, and non-deductible meals and entertainment expenses.  In addition, the effect of R&D credits utilized on our tax return in excess of initial estimates and the reversal of an accrual for unrecognized tax benefits were reflected in the effective tax rate for the three- and nine-month period ended September 30, 2011.

Fuel Tech had unrecognized tax benefits of $667 as of September 30, 2011 and $870 as of December 31, 2010, all of which, if ultimately recognized, will reduce Fuel Tech’s annual effective tax rate.  The decrease of $203 was recognized in the quarter ended September 30, 2011.