6.  Income Taxes



The income tax provision consists of the following:







The components of deferred income taxes are as follows:







In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. As of December 31, 2017, the Company continues to maintain a valuation allowance against all of its deferred tax assets except for its AMT Credit carryforward, which is treated as a refundable attribute under the amendments to the tax laws enacted in December 2017 and is included in other assets on the Company’s consolidated balance sheet.



In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The standard became effective beginning with the first quarter of 2017.  As a result of the Company’s adoption of ASU No. 2016-09 in 2017, the Company recognizes the excess tax benefits as a reduction of income tax expense regardless of whether the benefit reduces income taxes payable. The Company has elected to continue to estimate and apply a forfeiture rate based on awards expected to vest.  The adoption of this standard had no impact on the Company's consolidated financial statements.



On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The Tax Reform Act makes broad and complex changes to the U.S. tax code that affect fiscal 2017 including, but not limited to, a reduction of the U.S. federal corporate tax rate from 35% to 21% starting 1/1/2018, changes to bonus depreciation starting late September 2017, repeal of the domestic manufacturing deduction, and the elimination of the Alternative Minimum Tax starting in 2018.  As a result of the Tax Reform Act, the Company has remeasured its deferred tax assets as of December 31, 2017 to the new 21% federal tax rate, which resulted in a reduction of $1,002,994 to the net deferred tax asset, offset by a corresponding change to the valuation allowance.  



In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for income tax effects of the Tax Reform Act.  The final amounts may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act.



For the year ended December 31, 2017, the Company has federal and state net operating loss carryforwards totaling $10,275,000 and $12,317,000 respectively, which begin to expire in 2031. The Company also had federal and state tax credit carryovers of $306,000 and $268,000, respectively. The federal and state credits begin to expire in 2027 and 2017, respectively.



The Company files a consolidated federal income tax return.  The actual income tax provision differs from applying the Federal statutory income tax rate (34%) to the pre-income tax loss from continuing operations as follows:





The Company follows the provisions of ASC 740, “Accounting for Uncertainty in Income Taxes - An Interpretation of SFAS No. 109” (“ASC 740”).  ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. No interest and penalties related to uncertain tax positions were accrued at December 31, 2017. 



The Company’s tax years ended December 31, 2014 or later remain subject to examination by the IRS and state taxing authorities.