Note 13. Income Taxes:

Income tax expense (benefit) for the years ended December 31 consists of the following components:

 

Deferred tax assets and liabilities at December 31 consist of:

 

At December 31, 2017, the Company had federal net operating loss (“NOL”) carryforwards for income tax purposes of approximately $17.8 million, which expire in 2034. At December 31, 2017, the Company had state NOL carryforwards for income tax purposes of approximately $63.1 million, which expire between 2018 and 2036.  The Company has determined that, at December 31, 2017 and 2016, its ability to realize future benefits of its state NOL carryforwards does not meet the “more likely than not” criteria in ASC 740, Income Taxes. Therefore, a valuation allowance of $3.1 million has been recorded in each year, respectively.

ASC 740-10-25 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has determined that they did not have any uncertain tax positions requiring recognition as a result of the provisions of ASC 740-10-25. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions as part of interest expense. For the years ended December 31, 2017, 2016, and 2015, no estimated interest or penalties were recognized for the uncertainty of tax positions taken. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In general, the Company is no longer subject to U.S. federal and state tax examinations for years prior to 2014.

Reconciliation of the federal statutory rate and the effective income tax rate for the years ended December 31 is as follows:

 

In December 2017, the U.S. Congress passed the TCJA which reduced the corporate income tax rate to 21%, effective January 1, 2018. Other significant changes accompanying the corporate income tax rate reduction include eliminating the corporate alternative minimum tax, limiting the interest expense deduction to 30% of adjusted taxable income, and limiting net operating losses to 80% of taxable income for losses arising in tax years beginning after 2017.  As a result of the TCJA, the Company was required to remeasure its deferred tax assets and liabilities at the newly enacted rate, resulting in $0.2 million of income tax expense for the year ended December 31, 2017. The permanent differences for the year ended December 31, 2017, are primarily related to income tax benefits of $4.2 million as a result of stock option exercises.