Note 14 - Income Taxes



The components of income tax expense are summarized as follows:









(a) On December 22, 2017 the Tax Cut and Jobs Act was signed into law. ASC 740 (Income Taxes) requires the recognition of the effect of changes in tax laws or rates in the period in which the legislation is enacted. The revaluation of deferred tax assets and liabilities to the new 21% federal tax rate are materially complete and are reflected in income tax expense for fiscal year 2017.

Note 14 – Income Taxes



The tax effects of existing temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are as follows:







In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. In making this assessment, management has considered the profitability of current core operations, future market growth, forecasted earnings, future taxable income, and ongoing, feasible and permissible tax planning strategies. If the Company was to determine that it would not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and carry forwards are available.



On December 22, 2017 the Tax Cut and Jobs Act was signed into law. ASC 740 (Income Taxes) requires the recognition of the effect of changes in tax laws or rates in the period in which the legislation is enacted. The changes in the deferred tax assets and liabilities remeasured at the new 21% federal tax rate are reflected in income tax expense for fiscal year 2017.



At December 31, 2017 and 2016, gross deferred tax assets related to net operating loss carry forwards totaled $0 and $23,000, respectively, consisting of $23,000 federal assets acquired in a 2011 acquisition.



In conjunction with the Company’s acquisition of Allegiance in 2011, the Company acquired a federal net operating loss carry forward of $1.2 million. This carry forward is available for use through 2030; however, in accordance with Internal Revenue Code Section 382, usage of the carry forward is limited to $235,000 annually on a cumulative basis (portions of the $235,000 not used in a particular year may be added to subsequent usage). At December 31, 2017 and 2016, the Company had approximately $0 and $23,000 remaining of this federal net operating loss carry forward available to offset future taxable income for federal tax reporting purposes.



Note 14 - Income Taxes (Continued)



The following table presents a reconciliation between the reported income tax expense and the income tax expense which would be computed by applying the normal federal income tax rate of between 34 and 35% in 2017, 2016,  and 2015 to income before income tax expense, with an adjustment for the tax effect of the new 21% federal tax rate on deferred assets and liabilities as of December 31, 2017 (a):