Entity information:
Note
1
0
– Income Taxes
At
December
31,
2016,
the Company had approximately
$27,000
in capital loss carryforwards, and
$1,279,000
of federal research and development tax credits.
 
If not utilized, the investment tax credits expire from
2016
through
2030
and the research and development tax credits expire from
2031
-
2036.
Based on the available objective evidence, including the Company’s history of taxable income and the character of that income, management believes it is more likely than not that these components of the Company’s deferred tax assets will be fully utilized. The Company has provided for a partial valuation allowance against its total net deferred tax assets at
December
31,
2016
and
December
31,
2015
of approximately
$475,000
attributable to these components.
 
The expense/(benefit) for income taxes includes the following:
 
   
2016
    
2015
  
Current:
                
Federal
   $
(71,070
 )   $
---
  
State
    
2,504
      
3,070
  
Total current tax provision
    
(68,566
 )    
3,070
  
Deferred:
                
Federal
    
(435,495
 )    
1,317,125
  
State
    
-
      
---
  
Total deferred tax provision
    
(435,495
 )    
1,317,125
  
Income tax (benefit)/expense
  $
(504,061
 )   $
1,320,195
  
 
In
March
2014,
New York State eliminated the state income tax for qualified manufacturing companies such as CVD. 
 
The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:
 
   
2016
    
2015
  
                 
Allowance for doubtful accounts
   $
771
     $
6,345
  
Inventory capitalization
    
19,071
      
11,540
  
Depreciation and amortization
    
(211,014
 )    
(228,610
 )
Investment tax credits
    
475,000
      
475,000
  
Research & development tax credits
    
1,278,690
      
1,134,168
  
Compensation costs
    
1,000,073
      
730,909
  
Vacation accrual
    
333,396
      
323,860
  
Accrued loss on legal settlement
    
--
      
--
  
Net operating loss carryforward
    
(7,280
 )    
--
  
Capital loss carryforward
    
26,627
      
26,627
  
Gross deferred tax asset
    
2,915,334
      
2,479,839
  
Less valuation allowance
    
(475,000
 )    
(475,000
 )
Net deferred tax asset
   $
2,440,334
     $
2,004,839
  
                 
Net current deferred tax asset
    
428,355
      
398,009
  
Net long-term deferred tax asset
    
2,011,979
      
1,606,830
  
Net deferred tax asset
   $
2,440,334
     $
2,004,839
  
 
 
The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:
 
   
2016
    
2015
  
                 
Expected provision at federal statutory tax rate (34%)
   $
(222,083)
     $
1,538,565
  
State taxes, net of federal benefit
    
2,504
      
3,070
  
Stock-based compensation expense
    
(269,163
 )     
(252,288
 )
                 
Net operating loss carryforward
    
(21,412
 )    
954,581
  
Federal research & development credit
    
(144,522
 )    
(437,303
 )
Other permanent differences
   
150,615
      
(486,430
 )
Income tax (benefit)/expense
   $
(504,061
 )   $
1,320,195