NOTE 10 - INCOME TAXES
The income tax expense consists of the following:
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Year Ended |
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2016 |
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2015 |
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Currently refundable taxes |
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Federal |
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$ |
— |
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$ |
— |
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State |
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— |
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— |
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Total refundable taxes |
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— |
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— |
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Deferred tax benefit |
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471 |
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407 |
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Change in valuation allowance for deferred tax assets |
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(515 |
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(422 |
) |
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Income tax expense |
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$ |
(44 |
) |
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$ |
(15 |
) |
The income tax (expense) benefit differs from the amounts determined by applying the statutory U.S. federal income tax rate of 34% to the loss before income taxes as a result of the following items:
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December 31, |
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December 31, |
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Amount |
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Percent |
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Amount |
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Percent |
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Income tax benefit computed at the statutory federal rate |
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$ |
413 |
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34.0 |
% |
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$ |
346 |
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34.0 |
% |
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State tax and other items |
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58 |
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7.5 |
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61 |
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6.0 |
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Change in valuation allowance |
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(515 |
) |
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(44.9 |
) |
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(422 |
) |
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(41.5 |
) |
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$ |
(44 |
) |
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(3.4 |
)% |
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$ |
(15 |
) |
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(1.5 |
)% |
The net deferred tax asset consists of the following:
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December 31, |
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2016 |
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2015 |
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Deferred tax assets |
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Accumulated depreciation |
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$ |
338 |
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$ |
313 |
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Bad debts |
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355 |
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388 |
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Reserve for off-balance-sheet loss |
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9 |
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4 |
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Deferred loan fees |
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32 |
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20 |
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Federal net operating loss carryforwards |
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2,472 |
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2,062 |
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Illinois net operating loss carryforwards |
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463 |
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435 |
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ESOP |
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26 |
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27 |
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Deferred rent |
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51 |
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53 |
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Stock options and awards |
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18 |
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18 |
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Unrealized loss on securities available-for-sale |
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57 |
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13 |
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Repossessed asset valuation allowance |
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92 |
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65 |
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Deferred tax liabilities |
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FHLB stock dividends |
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(89 |
) |
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(89 |
) |
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3,824 |
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3,309 |
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Valuation allowance for deferred tax assets |
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(3,824 |
) |
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(3,309 |
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Net deferred tax asset |
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$ |
— |
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$ |
— |
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The Company established a valuation allowance for net deferred tax assets based on management’s assessment of the ability to realize the deferred tax asset primarily based on the tax losses incurred in recent years and, under current law, the inability to recover any additional taxes paid in prior years. As of December 31, 2016, state net operating losses of $9,167 are being carried forward and will be available to reduce future taxable income. These state net operating loss carryforwards will expire beginning in 2019 through 2028 if not utilized to reduce future taxable income.
The Company’s net operating losses for federal income taxes were $7,396 and $6,063 as of December 31, 2016 and 2015 of which $7,396 are being carried forward to reduce taxable income in future years. These federal net operating loss carryforwards will begin to expire in 2030.
The Company is subject to federal income tax as well as income tax of the state of Illinois. The Company is no longer subject to examination by taxing authorities for years before 2013.