Income Taxes –
At December 31, 2016, the Company did not have any unrecognized tax benefits. The year subject to potential audit varies depending on the tax jurisdiction. Generally, the Company’s statutes are open for tax years ended December 31, 2013 and forward. The Company’s major taxing jurisdictions include the United States, Ohio, Maryland, and other state and local jurisdictions.
For the year ended December 31, 2016 there was a provision for income tax expense of $531,056 which came from i) an increase of approximately $29,000 in deferred tax liabilities, ii) approximately $501,000 of federal and local income tax expense payable, and iii) approximately $1,000 in state franchise taxes.
For the year ended December 31, 2015 there was a provision for income tax expense of $750,592 which came from i) an increase of approximately $52,200 in deferred tax liabilities, and ii) approximately $698,000 of federal and local income tax expense payable.
Following is a reconciliation of the expected income tax expense to the amount based on the U.S. statutory rate of 34% for the years ended December 31, 2016 and December 31, 2015.
| | | 2016 | | 2015 | |
| Income tax expense based on US statutory rate | | $ | 909,721 | | $ | 709,751 | |
| State/Local income tax, net of federal tax benefit | | | 19,371 | | | 27,609 | |
| Nondeductible items | | | 9,757 | | | 14,970 | |
| Deduction for amortization of intangible asset | | | (4,995) | | | (4,995) | |
| Deductible items | | | (402,066) | | | (2,089) | |
| Other | | | (732) | | | 5,346 | |
| Provision for Income Taxes | | $ | 531,056 | | $ | 750,592 | |
The line item “Deductible items” includes the tax effects of the 2016 premium payment to Series OP and the commission payment to the DISC.
The significant components of the Company’s deferred liability are as follows:
| | | 2016 | | 2015 | |
| Section 179 Properties | | $ | 334,024 | | $ | 333,834 | |
| Deductible Items | | | 28,729 | | | 0 | |
| Total | | $ | 362,753 | | $ | 333,834 | |