The items comprising the income tax provision are as follows:

Total income tax (benefit)/expense differs from the amount that would be provided by applying the statutory federal income tax rate to pretax earnings as illustrated below:

 

Temporary differences and carry-forwards that give rise to a significant portion of deferred tax assets and liabilities as of December 31, 2017 and 2016 were as follows:

Deferred federal income taxes arise from temporary differences between the valuation of assets and liabilities as determined for financial reporting purposes and federal income tax purposes and are measured at enacted tax rates.  As of December 31, 2016, the Company measured its deferred tax items at an effective federal tax rate of 34%.  On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed into law.  Among other things, the Act reduced the Company's corporate federal tax rate to a flat 21% for years after 2017.  As a result, the Company's deferred tax items are measured at an effective federal tax rate of 21% as of December 31, 2017.  Although realization is not assured, management believes it is more likely than not that the entire deferred federal income tax asset will be realized.  The amount of the deferred federal income tax assets considered realizable could be reduced in the near term if estimates of future taxable income are reduced.

The current year federal operating loss carryovers of approximately $16 million will be available to offset taxable income in future years through 2037 (and would be available in the two preceding years if the Company had taxable income in such years).  The current year state operating loss carryovers of approximately $62,000 will be available to offset taxable income in the two preceding years and in future years through 2037.  The Company expects to utilize the net operating loss carryovers remaining at December 31, 2017 in future years.

 

Utilization of the domestic NOLs may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code Section 382, as well as similar state provisions. In general, an "ownership change," as defined by the code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Any limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization.

 

During the year ended December 31, 2017, the Company had pre-tax income from domestic sources of approximately $2.2 million and pre-tax income from foreign sources of approximately $1.2 million.  The Company had pre-tax income from domestic sources of approximately $1.6 million and pre-tax income from foreign sources of approximately $388,000 for the year ended December 31, 2016.  The foreign tax credit carryover will be available to offset federal tax expense in future years through 2027.

The Act repeals the corporate alternative minimum tax for tax years beginning after 2017.  In addition, beginning in 2018, the Company's alternative minimum tax credit ("MTC") will be available to offset federal tax expense and is refundable in an amount equal to 50% of the excess MTC for the tax year over the amount of the credit allowable for the year against regular tax liability.  In 2021, any remaining MTC will be fully refundable.

At December 31, 2017 and December 31, 2016, the Company had no material uncertain tax positions.

The Company accounts for interest related to uncertain tax positions as interest expense, and for income tax penalties as tax expense.

All of the Company's tax years remain open to examination other than as barred in the various jurisdictions by statutes of limitation.