Note 8 – Income taxes:
The components of the Company’s consolidated provision (benefit) for income taxes are as follows:
| 2017 | 2016 | |||||||
| Federal – current | $ | 1,101,503 | $ | 982,298 | ||||
| Federal – deferred | (60,364 | ) | (25,565 | ) | ||||
| State – current | 31,930 | 27,163 | ||||||
| State – deferred | 892 | (745 | ) | |||||
| Total provision for income taxes | $ | 1,073,961 | $ | 983,151 | ||||
The reconciliation of the provision for income taxes at the statutory rate to the reported provision for income taxes is as follows:
| 2017 | % | 2016 | % | |||||||||||||
| Income Tax computed at statutory rate | $ | 1,250,348 | 34.0 | % | $ | 1,046,629 | 34.0 | % | ||||||||
| State tax, net of federal benefit | 21,074 | 0.6 | % | 17,916 | 0.6 | % | ||||||||||
| Share based compensation | (6,303 | ) | (0.2 | )% | (2,013 | ) | (0.1 | )% | ||||||||
| Domestic production activities deduction | (110,410 | ) | (3.0 | )% | (97,645 | ) | (3.2 | )% | ||||||||
| Effect of tax rate change on deferred taxes | (90,980 | ) | (2.5 | )% | --- | 0.0 | % | |||||||||
| Permanent adjustments | 24,202 | 0.7 | % | 23,991 | 0.8 | % | ||||||||||
| Tax credits and other | (13,970 | ) | (0.4 | )% | (5,727 | ) | (0.2 | )% | ||||||||
| Provision for income taxes | $ | 1,073,961 | 29.2 | % | $ | 983,151 | 31.9 | % | ||||||||
The Company’s deferred tax asset (liability) consisted of the following at December 31, 2017 and 2016:
| 2017 | 2016 | |||||||
| Deferred tax asset (liability) | ||||||||
| Inventory reserves | $ | 68,631 | $ | 93,829 | ||||
| Trade accounts receivable allowances | 9,017 | 26,259 | ||||||
| Net Operating loss carryforward state | 366,176 | 303,784 | ||||||
| Depreciation of property and equipment | (231,543 | ) | (333,455 | ) | ||||
| Net deferred tax asset | 239,549 | 90,417 | ||||||
| Valuation allowance | (366,176 | ) | (303,784 | ) | ||||
| Total net deferred tax (liability) | $ | (153,895 | ) | $ | (213,367 | ) | ||
The Tax Cuts and Jobs Act was enacted on December 22, 2017. The legislation significantly changes United States tax law by, among other things, reducing our corporate income tax rates from 34% to 21%, effective January 1, 2018. As a result of the reduction in the corporate income tax rate, the Company revalued its net deferred tax liabilities at December 31, 2017 and recognized a $90,980 tax benefit in the Company’s consolidated statement of operations
At December 31, 2017 and 2016, the Company has a net operating loss carryforward with the state of Alabama. The net operating losses of $5,636,482 and $4,676,600 expire between 2020 and 2031. The Company does not expect to be able to utilize these losses and has recorded a valuation allowance for the full amount of the net operating losses.