Note 7 - Income Taxes
The components of income tax expense consist of the following for the years ended December 31:
| | | 2016 | | 2015 | |
| | | | | | |
| Current: | | | | | | | |
| Federal | | $ | 128,926 | | $ | 638,410 | |
| State | | | 54,747 | | | 183,697 | |
| Total current | | | 183,673 | | | 822,107 | |
| | | | | | | | |
| Deferred: | | | | | | | |
| Federal | | | (9,471) | | | (69,058) | |
| State | | | (7,549) | | | (5,981) | |
| Total deferred | | | (17,020) | | | (75,039) | |
| Total Income Tax | | $ | 166,653 | | $ | 747,068 | |
At December 31, 2016 and 2015, the Company had no federal or state net operating loss carry-forwards.
The tax effects of temporary differences that gave rise to significant portions of net deferred tax assets at December 31, 2016 and 2015 are as follows:
| | | 2016 | | 2015 | |
| Accruals and reserves | | $ | 233,398 | | $ | 247,486 | |
| State taxes | | | 16,569 | | | 61,000 | |
| Property, plant and equipment | | | (88,802) | | | (164,341) | |
| Total Deferred Tax Assets | | $ | 161,165 | | | 144,145 | |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the 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 temporary differences become deductible or includable in taxable income. Management considers projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical income and projections for future taxable income over the periods to which the deferred tax assets are applicable, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.
The Company accounts for uncertain tax positions as required by FASB ASC Topic 740. FASB ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by defining the criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprise’s financial statements. The accounting standard 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 as well as guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. No significant income tax uncertainties have been identified by the Company and, therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2016 and 2015.
The Company is no longer subject to U.S. federal income tax examination for years before 2012 and state and local tax examinations before 2011. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carry-forward amount.
The total income tax expense differs from the amounts computed by applying the statutory federal income tax rate of 34% as follows:
| | | 2016 | | 2015 | |
| | | | | | |
| Computed tax expense | | $ | 25,746 | | $ | 555,780 | |
| Nondeductible items and other | | | 110,277 | | | 74,569 | |
| Current and deferred state taxes, net of federal benefit | | | 30,630 | | | 116,719 | |
| | | | | | | | |
| Total Income Tax Expense | | $ | 166,653 | | $ | 747,068 | |