| (2) | Income Taxes |
A reconciliation of the provision for income taxes computed at the Federal statutory rates for fiscal 2017 and 2016 to the reported amounts is as follows:
| 2017 | 2016 | ||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||
| Amounts at statutory Federal tax rate | $ | 196,000 | 34.0 | % | $ | 287,000 | 34.0 | % | |||||||||
| Noncontrolling interest | (16,000 | ) | (2.8 | ) | (19,000 | ) | (2.3 | ) | |||||||||
| State and local taxes, net of Federal income tax effect. | 56,000 | 9.7 | 88,000 | 10.4 | |||||||||||||
| Non-deductible expenses and other | 27,000 | 4.7 | 33,000 | 3.9 | |||||||||||||
| $ | 263,000 | 45.6 | % | $ | 389,000 | 46.0 | % | ||||||||||
The components of the provision for income taxes are as follows:
| Federal | State | Total | |||||||||||
| 2017: Current | $ | 170,000 | $ | 68,000 | $ | 238,000 | |||||||
| Deferred | 8,000 | 17,000 | 25,000 | ||||||||||
| $ | 178,000 | $ | 85,000 | $ | 263,000 | ||||||||
| 2016: Current | $ | 253,000 | $ | 119,000 | $ | 372,000 | |||||||
| Deferred | 3,000 | 14,000 | 17,000 | ||||||||||
| $ | 256,000 | $ | 133,000 | $ | 389,000 | ||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets at May 31, 2017 and 2016 are as follows:
| 2017 | 2016 | ||||||||
| Allowance for doubtful accounts receivable | $ | 75,000 | $ | 78,000 | |||||
| Accrued compensation and other accrued expenses | 38,000 | 50,000 | |||||||
| Net operating loss carryforward | - | 10,000 | |||||||
| Equipment and leasehold improvement depreciation and amortization | (4,000 | ) | (6,000 | ) | |||||
| Acquired client relationships | 2,000 | 2,000 | |||||||
| Unrealized gain | (5,000 | ) | (3,000 | ) | |||||
| Total deferred income tax assets | $ | 106,000 | $ | 131,000 | |||||
The Company believes that it is more likely than not that it will realize the benefits of its deferred tax assets based primarily on the Company’s history of and projections for taxable income in the future.
The Company has no unrecognized tax benefits at May 31, 2017 and 2016. The Company’s Federal and state income tax returns prior to fiscal year 2014 are closed.
The Company recognizes interest and penalties associated with tax matters as selling, general and administrative expenses and includes accrued interest and penalties with accrued and other liabilities in the consolidated balance sheets.