INCOME TAXES

The Company accounts for income taxes using ASC 740, “Income Taxes” which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized differently in the financial statements and the tax returns. The provision for income taxes consists of the following at December 31:



($ in thousands)	2012		2011			2010
Total provision:	$	2,723	$	7,367		$	2,852
Federal:
Current	$	903	6,812			169
Deferred	1,092		(1,233		)	2,055
	1,995		5,579			2,224
State:
Current	67		2,133			112
Deferred	661		(345		)	516
	728		1,788			628
	$	2,723	$	7,367		$	2,852

The reasons for the difference between total income tax expense and the amount computed by applying the statutory Federal income tax rate of 38% to income before taxes are as follows for the years ended December 31:



($ in thousands)	2012			2011			2010
Income tax at statutory rate	$	2,382		$	7,909		$	2,389
State income taxes, net of Federal benefit	472			1,180			384
Oil and mineral depletion	(620		)	(552		)	(275		)
Valuation allowance - land contribution	—			(595		)	—
Other, net	489			(575		)	354
Total provision	$	2,723		$	7,367		$	2,852

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31:



($ in thousands)	2012		2011
Deferred income tax assets:
Accrued expenses	$	525	$	222
Deferred revenues	512		829
Capitalization of costs	1,758		1,746
Pension adjustment	4,262		3,660
Stock grant expense	7,005		6,955
State deferred taxes	777		761
Book deferred gains	963		963
Provision for additional capitalized costs	1,003		1,210
Other	73		382
Total deferred income tax assets	$	16,878	$	16,728
Deferred income tax liabilities:
Deferred gains	$	1,390	$	1,390
Depreciation	3,374		2,504
Cost of sales allocations	1,252		1,252
Joint venture allocations	2,084		1,054
Straight line rent	1,063		1,117
Prepaid expenses	212		189
State deferred taxes	345		574
Other	785		704
Total deferred income tax liabilities	$	10,505	$	8,784
Net deferred income tax asset	$	6,373	$	7,944
Allowance for deferred tax assets	—		—
Net deferred taxes	$	6,373	$	7,944

The net current and non-current deferred tax assets for 2012 and 2011 are included separately on the face of the balance sheet. Due to the nature of most of our deferred tax assets, the Company believes they will be used through operations in future years and an allowance is not necessary.

During 2012 and 2011, the Company recognized certain net tax benefits related to stock option plans in the amount of $8,000 and $634,000, respectively. Such benefits were recorded as a reduction of income taxes payable and an increase in additional paid in capital.

The Company made total income tax payments of $4,601,000 in 2012 and $6,600,000 during 2011. The Company received federal refunds of $580,000 and $1,598,000 in 2012 and 2011, respectively.

The Company classifies interest and penalties incurred on tax payments as income tax expenses. During 2010, the Company paid approximately $137,000 in interest costs related to the settlement of a tax audit. The Company evaluates its tax positions for all income tax items based on their technical merits to determine whether each position satisfies the “more likely than not to be sustained upon examination” test. The tax benefits are then measured as the largest amount of benefit, determined on a cumulative basis, that is “more likely than not” to be realized upon ultimate settlement. As a result of the this evaluation, the Company determined there were no uncertain tax positions that required recognition and measurement for the years ended December 31, 2012 and 2011 within the scope of ASC 740, "Income Taxes." Tax years from 2009 to 2011 and 2008 to 2011 remain available for examination by the Federal and California State taxing authorities, respectively.