Note 12 - Income taxes



The Company files income tax returns in the U.S. federal jurisdiction and the state of Virginia.  With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2014.

Income tax expense attributable to income before income tax expense is summarized as follows:



Income tax expense differed from amounts computed by applying the U.S. Federal income tax rate of 34% to income before income tax expense as a result of the following:



The results for the year ended December 31, 2017 include the effect of the Tax Cuts and Jobs Act (the Act), which was signed into law on December 22, 2017.  Among other things, the Act permanently lowers the federal corporate income tax rate to 21% from the maximum rate prior to the passage of the Act of 35%, effective January 1, 2018.  As a result of the reduction of the federal corporate income tax rate, U.S. GAAP requires companies to re-measure their deferred tax assets and deferred tax liabilities, including those accounted for in accumulated other comprehensive income, as of the date of the Act’s enactment and record the corresponding effects in income tax expense in the further quarter of 2017.  As a result of the permanent reduction in the corporate income tax rate, the Company recognized a $871,000 reduction in the value of its net deferred tax asset and recorded a corresponding incremental income tax expense of $871,000 in the Company’s consolidated results

Note 12 - Income taxes (continued)

of operations for the fourth quarter of 2017.  The Company’s evaluation of the effect of the Act is subject to refinement for up to one year after enactment.



The tax effects of temporary differences result in deferred tax assets and liabilities as presented below: