6.  Income Taxes

Deferred tax attributes resulting from differences between financial and accounting amounts and tax basis of assets and liabilities at December 31, 2011 and 2010 are as follows:

The provision for income taxes is as follows:

The effective tax rate for year ended December 31, 2010 was impacted by a benefit of $78 thousand related to the reversal of the Company’s liability related to uncertain tax positions.

The reasons for the difference between total tax expense and the amount computed by applying the U.S. statutory federal income tax rate to income before income taxes are as follows:

The Company receives a tax deduction from the gains realized by employees on the exercise of certain non-qualified stock options for which the tax effect of the difference between the book and tax deduction is recognized as a component of stockholders’ equity.

The Company accounts for uncertainties in accordance with FASB ASC 740 “Income Taxes”. This standard clarified the accounting for uncertainties in income taxes. The standard prescribes criteria for recognition and measurement of tax positions. It also provides guidance on derecognition, classification, interest and penalties, and disclosures related to income taxes associated with uncertain tax positions.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal consolidated tax return and its state tax return in New Jersey and its Canadian tax return as major tax jurisdictions. The only periods subject to examination for the Company’s federal return are the 2009, 2010 and 2011 tax years. The audit of the tax years 2006 and 2007 has been completed, with no adjustments proposed by the Internal Revenue Service “IRS”.  The current periods subject to examination for the Company’s state returns in New Jersey are years 2009, 2010 and 2011. The current periods subject to examination for the Company’s Canadian tax returns are the years 2009 through 2011. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense when assessed. No liability was recorded for interest or penalties related to uncertain tax positions at December 31, 2011 and 2010.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

The most recent IRS examination was of the Company’s 2006-2007 tax returns which were completed by the IRS as of March 1, 2010, and management believes that all uncertain tax positions were resolved at that time.

For financial reporting purposes, income before income taxes includes the following components: