11 — Income Taxes

 

On December 22, 2017, the Tax Cuts and Jobs Act (“2017 Act”) was enacted. The 2017 Act includes a number of changes to existing U.S. tax laws that impact us, most notably a reduction of the U.S. corporate income tax from 34 percent to 21 percent effective January 1, 2018. The 2017 Act also provides for the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as prospective changes beginning in 2018, including repeal of the domestic production activities deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures and additional limitations on executive compensation.

 

We recognized the income tax effects of the 2017 Act in our 2017 financial statements in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the 2017 Act was signed into law. As such, our financial results reflect the income tax effects of the 2017 Act for which the accounting under ASC Topic 740 is complete and provisional amounts for those specific income tax effects of the 2017 Act for which the accounting under ASC Topic is incomplete but a reasonable estimate could be determined. We did not identify items for which the income tax effects of the 2017 Act have not been completed and a reasonable estimate could not be determined as of December 31, 2017.

 

The following table presents the impact of the 2017 Act as an increase (decrease) reflected in the noted line item in the Statements of Operations and Balance Sheet:

 

 

 

The changes to existing tax laws as a result of the 2017 Act, which we believe have the most significant impact on our federal income taxes is the reduction of the U.S. corporate income tax rate. We measure deferred tax assets and deferred tax liabilities using the enacted tax rates that will apply in the years in which the temporary differences are expected to reverse. Accordingly, our deferred tax assets and deferred tax liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 34 percent to 21 percent, resulting in a $473,899 increase in income tax expense for the year ended December 31, 2017 and a corresponding decrease in net deferred tax assets as of December 31, 2017.

 

Effective January 1, 2018, the 2017 Act requires the acceleration of revenue for tax purposes for certain types of revenue. This change impacts certain accounting methods that we previously used and is expected to result in the acceleration of taxability of such revenue beginning in 2018 as compared with prior U.S. tax laws.

 

The components of the provision for income taxes are as follows:

 

 

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 our deferred taxes are as follows:

 

 

A reconciliation of the statutory U.S. federal tax rate to our effective rate is as follows:

 

 

As of December 31, 2017 and December 31, 2016, we had not identified or accrued for any uncertain tax positions. We are currently unaware of any uncertain tax positions that could result in significant payments, accruals or other material deviations in this estimate over the next 12 months.

 

We file tax returns in the United States Federal jurisdiction and many U.S. state jurisdictions. Our returns are not currently under examination by the Internal Revenue Service or other taxing authorities. The Company is subject to income tax examinations for our United States Federal and certain U.S. state income taxes for 2014 and subsequent years and various other U.S. state income taxes for 2013 and subsequent years.