NOTE 13. INCOME TAXES
The components of the provision consist of the following for the years ended December 31, 2016 and 2015:
|
|
|
2016 |
|
|
2015 |
|
||
|
Current: |
|
|
|
|
|
|
(restated) |
|
|
Federal |
|
$ |
680,882 |
|
|
$ |
165,530 |
|
|
State |
|
|
20,561 |
|
|
|
3,711 |
|
|
Total current |
|
|
701,443 |
|
|
|
169,241 |
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
Federal |
|
|
71,657 |
|
|
|
25,657 |
|
|
State |
|
|
(2,377 |
) |
|
|
17 |
|
|
Change in valuation allowance |
|
|
— |
|
|
|
— |
|
|
Total deferred |
|
|
69,280 |
|
|
|
25,674 |
|
|
Income tax provision |
|
$ |
770,723 |
|
|
$ |
194,915 |
|
The income tax provision differs from that computed at the federal statutory corporate income tax rate as follows for the years ended December 31, 2016 and 2015:
|
|
|
2016 |
|
|
2015 |
|
||
|
|
|
|
|
|
|
|
(restated) |
|
|
Tax provision computed at the federal statutory rate |
|
$ |
877,282 |
|
|
$ |
238,581 |
|
|
State income tax, net of federal benefit |
|
|
21,860 |
|
|
|
6,404 |
|
|
Permanent items |
|
|
63,737 |
|
|
|
22,460 |
|
|
Credits |
|
|
(58,159 |
) |
|
|
(26,173 |
) |
|
True ups and rounding |
|
|
(115,397 |
) |
|
|
(48,974 |
) |
|
Change in valuation allowance |
|
|
— |
|
|
|
— |
|
|
Uncertain tax positions |
|
|
(18,600 |
) |
|
|
2,617 |
|
|
Income tax provision |
|
$ |
770,723 |
|
|
$ |
194,915 |
|
The tax effects of significant temporary differences representing net deferred tax assets and liabilities consisted of the following at December 31, 2016 and 2015:
|
|
|
2016 |
|
|
2015 |
|
||
|
Deferred Tax Assets: |
|
|
|
|
|
|
(restated) |
|
|
Intangible assets |
|
$ |
178,057 |
|
|
$ |
135,234 |
|
|
Research and development credits |
|
|
— |
|
|
|
115,086 |
|
|
Accruals and reserves |
|
|
58,656 |
|
|
|
43,017 |
|
|
Credits from amended return |
|
|
192,461 |
|
|
|
253,298 |
|
|
Other |
|
|
122,744 |
|
|
|
77,813 |
|
|
Total deferred tax assets |
|
|
551,918 |
|
|
|
624,448 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|
|
Basis difference in fixed assets |
|
|
(184,861 |
) |
|
|
(145,781 |
) |
|
Foreign currency exchange gains |
|
|
— |
|
|
|
(42,329 |
) |
|
Total deferred tax liabilities |
|
|
(184,861 |
) |
|
|
(188,110 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
367,057 |
|
|
$ |
436,338 |
|
In accordance with ASC Topic 740, we analyzed our valuation allowance at December 31, 2016 and determined that, based upon available evidence, it is more likely than not that certain of our deferred tax assets will be realized and, as such, has removed any valuation allowance against certain deferred tax assets. We anticipate utilization of both our foreign tax credits and research credit carryforwards.
The aggregate changes in the balance of gross unrecognized tax benefits (included as part of accrued expenses in the accompanying financial statements), which excludes interest and penalties, are as follows as of and for the years ended December 31, 2016 and 2015:
|
|
|
2016 |
|
|
2015 |
|
||
|
|
|
|
|
|
|
|
(restated) |
|
|
Beginning balance: |
|
$ |
51,074 |
|
|
$ |
42,080 |
|
|
Increases related to tax positions taken during the current year |
|
|
12,572 |
|
|
|
8,994 |
|
|
Decreases related to expiration of statute of limitations |
|
|
(6,760 |
) |
|
|
— |
|
|
Ending Balance: |
|
$ |
56,886 |
|
|
$ |
51,074 |
|
Our total liability for unrecognized gross tax benefits was $56,886 as of December 31, 2016, which, if ultimately recognized, would impact the effective tax rate in future periods. We are subject to examination by the Internal Revenue Service for fiscal years 2013 and thereafter. For states within the U.S. in which we conduct significant business, we remain subject to examination for fiscal year 2012 and thereafter. We have no accrual for interest or penalties related to uncertain tax positions at December 31, 2016 and 2015, and did not recognize interest or penalties in the statements of income during the years ended December 31, 2016 and 2015.
As of December 31, 2016, we expected to use our foreign tax credits of $30,332 to offset federal income tax owed in 2016.