The provision for income taxes for the fiscal years ended and consists of the following:

 

		Fiscal Year Ended August 31,
		2017				2016
Current:
Federal		$	—			$	—
State			62,000				20,000
Foreign			754,000				647,000
			816,000				667,000
Deferred:
Federal			(135,000	)			6,000
State			(9,000	)			—
Foreign			28,000				(47,000	)
			(116,000	)			(41,000	)
		$	700,000			$	626,000

 

Reconciliations of the expected federal income tax at the statutory rate with the provisions for income taxes for the fiscal years ended and are as follows:

 

		Fiscal Year Ended August 31,
		2017				2016
Tax computed at statutory rates		$	1,591,000			$	(195,000	)
State income tax, net of federal benefit			53,000				20,000
Tax effect on equity in income of international joint ventures			(1,998,000	)			(956,000	)
Tax effect on dividends received from joint ventures and investment at carrying value			3,159,000				2,681,000
Tax effect of foreign operations			841,000				997,000
Foreign tax credit			(3,680,000	)			(3,178,000	)
Research and development credit			(212,000	)			(408,000	)
Valuation allowance			989,000				1,620,000
Stock based compensation			81,000				90,000
Non-controlling interest			(143,000	)			(148,000	)
Other			19,000				103,000
		$	700,000			$	626,000

 

The Company has provided U.S. income taxes or foreign withholding taxes with respect to its portion of the cumulative undistributed earnings of foreign joint ventures that are essentially permanent in duration. The Company’s portion of the cumulative undistributed earnings of foreign joint ventures that are essentially permanent in duration were and as of and respectively.  During fiscal the Company recorded deferred income tax expense of representing foreign withholding taxes to be paid with respect to the portion of the cumulative undistributed earnings of foreign joint ventures that it determined were essentially permanent in duration. If some or all of the undistributed earnings of the joint ventures are remitted to the Company in the future, income taxes, if any, after the application of foreign tax credits will be provided at that time. To the extent undistributed earnings of the Company’s joint ventures are distributed in the future, it is expected to result in any material additional U.S. income tax liability after the application of foreign tax credits.

 

The tax effect of the temporary differences and tax carryforwards comprising the net deferred taxes shown on the consolidated balance sheets as of and are as follows:

 

		August 31,
		2017				2016
Accrued compensation		$	310,300			$	150,600
Inventory costs			87,000				95,300
Accrued joint venture expenses			15,200				54,200
Other accrued expenses			74,000				87,000
Goodwill and other intangible assets			1,317,700				1,332,000
Stock-based compensation			241,600				210,600
Foreign tax credit carryforward			6,105,700				5,679,000
Other credit and loss carryforwards			3,473,100				3,214,300
Total deferred tax assets			11,624,600				10,823,000
Valuation allowance			(9,578,700	)			(8,893,300	)
Total deferred tax assets after valuation allowance			2,045,900				1,929,700
Property and equipment			(206,000	)			(215,600	)
Other			(83,300	)			(74,300	)
Total deferred tax liabilities			(289,300	)			(289,900	)
Net deferred tax assets		$	1,756,600			$	1,639,800

 

As of the Company had foreign tax credit carryforwards of approximately which will begin to expire if utilized prior to In addition, the Company had federal and state tax credit carryforwards of as of which begin to expire in fiscal   These federal and state tax credit carryforwards consist primarily of federal and Minnesota research and development credit carryforwards. The Company also has foreign net operating loss carryforwards of as of which begin to expire in fiscal

 

As of the Company has recorded a valuation allowance of with respect to the foreign tax credit carryforwards.  In addition, the Company has recorded a valuation allowance of with respect to federal and state tax credit carryforwards, and has recorded a valuation allowance of with respect to the foreign net operating loss carryforwards.

 

As of the Company had recorded a valuation allowance of with respect to the foreign tax credit carryforwards.  In addition, the Company had recorded a valuation allowance of with respect to federal and state tax credit carryforwards, and had recorded a valuation allowance of with respect to the foreign net operating loss carryforwards.

 

The Company records a tax valuation allowance to reduce deferred tax assets to the amount expected to be realized when it is more likely than that some portion or all of its deferred tax assets will be realized.  The Company determined based on all available evidence, including historical data and projections of future results, that it is more likely than that all of its deferred tax assets, except for its foreign tax credit carryforward, federal and Minnesota research and development credit carryforwards, and foreign net operating loss carryforwards will be fully realized.  The Company determined that its deferred tax asset related to foreign tax credit carryforwards will be realized due to insufficient federal taxable income within the carryforward period and the fact that for ordering purposes the foreign tax credit carryforwards are allowed to be utilized until after any current year foreign tax credits are utilized.  In addition, based on historical data and future projections, the Company determined that it is more likely than that its deferred tax asset related to federal and Minnesota research and development credit carryforwards will be realized due to insufficient federal and Minnesota taxable income within the carryforward period after considering the foreign tax credit usage. The Company determined that its deferred tax asset related to foreign net operating loss carryforwards will be utilized due to insufficient taxable income within the carryforward period.

 

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

 

		Fiscal Year Ended August 31,
		2017				2016
Gross unrecognized tax benefits – beginning balance		$	238,000			$	203,000
Gross increases (decreases) - prior period tax positions			(4,000	)			15,000
Gross increases – current period tax positions			16,000				20,000
Gross unrecognized tax benefits – ending balance		$	250,000			$	238,000

 

The entire amount of unrecognized tax benefits would affect the effective tax rate.  It is expected that the amount of unrecognized tax benefits will change significantly in the next months.

 

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the Company’s income tax provision. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet. There was liability for the payment of interest and penalties as of both and

 

The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few exceptions, as of the Company is longer subject to federal, state, local, or foreign examinations by tax authorities for years prior to