NOTE 17 – INCOME TAX PROVISION
The Company accounts for income taxes under the provisions of FASB ASC 740, “Income Taxes”, formerly referenced as SFAS No.109, “Accounting for Income Taxes”. Under the provisions of FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying values and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that can be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
The provision for income taxes is as follows:
| September 30, 2017 | September 30, 2016 | |||||||
| Current taxes payable | ||||||||
| Federal | $ | (38,059 | ) | $ | 112,088 | |||
| State | (12,686 | ) | 46,363 | |||||
| Foreign | 166,393 | 904,721 | ||||||
| Deferred taxes | 1,891,000 | 27,000 | ||||||
| Deferred tax valuation allowance | - | - | ||||||
| Total | $ | 2,006,648 | $ | 1,090,172 | ||||
The foreign provision for income taxes is based on foreign pre-tax earnings of $4,653,748, and $5,965,747 in 2017 and 2016, respectively. The Company’s consolidated financial statements provide for any related tax liability on undistributed earnings that the Company does not intend to be indefinitely reinvested outside the U.S. Substantially all of the Company’s undistributed international earnings intended to be indefinitely reinvested in operations outside the U.S.
Reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
| For the Fiscal Year | For the Fiscal Year | |||||||
| Ended | Ended | |||||||
| September 30, 2017 | September 30, 2016 | |||||||
| U.S. statutory rate | 34.00 | % | 34.00 | % | ||||
| State income taxes (net of federal benefit) | 9 | % | 9 | % | ||||
| Permanent differences | 0.29 | % | 1.77 | % | ||||
| Foreign | -40.72 | % | -27.29 | % | ||||
| Benefit of net operating loss carry-forward | 0.00 | 0.00 | ||||||
| Effective rate | 2.57 | % | 0.03 | % | ||||
At September 30, 2017 and 2016, the Company has no net operating loss carryovers.