6. Income Taxes. Income tax expense (benefit) consists of the following:


Year Ended December 31		2012		2011
Current taxes - Federal	$	(772,000)	$	22,678,000
Current taxes - State		47,000		2,383,000
Deferred taxes - Federal		101,000		5,226,000
Deferred taxes - State		(9,000)		319,000

Income tax expense (benefit)	$	(633,000)	$	30,606,000

Significant components of the deferred taxes are as follows:


As of December 31		2012		2011
Current Deferred Tax Assets:
Accrued compensation	$	304,000	$	304,000
Accrued expenses		142,000		147,000
Inventory reserve		10,000		27,000
Net operating loss carryforwards		8,000		—
Other		14,000		5,000

Current deferred tax assets	$	478,000	$	483,000

Long-Term Deferred Tax Assets (Liabilities):
Depreciation	$	(513,000)	$	(692,000)
Stock options		46,000		26,000
Accrued compensation		—		304,000
Net operating loss carryforwards		54,000		36,000

Long-term deferred tax liabilities	$	(413,000)	$	(326,000)

The Company utilized federal net operating loss carryforwards of approximately $18,744,000 during 2011. Additionally, the Company utilized alternative minimum tax credit carryforwards of $125,000 during 2011.

The Company evaluates all significant available positive and negative evidence, including the existence of losses in the current year and years prior to 2011 and its forecast of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions the Company uses in forecasting future taxable income require significant judgment and take into account the Company’s recent performance.

The actual tax expense (benefit) attributable to income from continuing operations differs from the expected tax expense (benefit) computed by applying the U.S. federal corporate income tax rate of 35% to the net income (loss) as follows:


Year Ended December 31	2012		2011
Federal statutory rate	(35.0)	%	35.0	%

Stock options	4.6		(0.2)
State taxes	0.1		2.0
Other permanent differences	1.1		—
Impact of uncertain tax positions	0.9		0.5
Other	0.2		0.2

Effective federal income tax rate	(28.1)	%	37.5	%

The Company has recorded a liability of $430,000 and $424,000 for uncertain tax positions taken in tax returns in previous years as of December 31, 2012 and 2011, respectively. This liability is reflected as Accrued Income Taxes on the Company’s Balance Sheets. The Company files income tax returns in the United States and numerous state and local tax jurisdictions. Tax years that are open for examination and assessment by the Internal Revenue Service are 2009 and forward. With limited exceptions, tax years prior to 2009 are no longer open in major state and local tax jurisdictions. The Company does not anticipate that the total unrecognized tax benefits will change significantly prior to December 31, 2013.

A reconciliation of the beginning and ending amount of the liability for uncertain tax positions is as follows:


Balance at January 1, 2011	$	—
Increases due to current year positions		424,000

Balance at December 31, 2011		424,000
Reductions as a result of filing state tax returns		(13,000)
Increases due to interest		19,000

Balance at December 31, 2012	$	430,000