INCOME TAXES | INCOME TAXES CCA and its subsidiaries file a consolidated federal income tax return. The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax Positions”. Management believes that there were no unrecognized tax benefits, or tax positions that would result in uncertainty regarding the deductions taken, as of November 30, 2016 and November 30, 2015 . ASC Subtopic 740-10-25 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company files federal and state income tax returns in jurisdictions with varying statutes of limitations. The 2012 through 2015 tax years remain subject to examination by federal and state tax authorities. The Company is not under examination by any federal and state tax authorities as of November 30, 2016. The charitable contributions and net operating loss portion of the deferred tax asset has $8,412,035 that has been reclassified as a long-term asset, based on an estimate of the amount that will be realizable in periods greater than twelve months from November 30, 2016 . At November 30, 2016 and November 30, 2015, respectively, the Company had temporary differences arising from the following: November 30, 2016 Classified As Type Amount Deferred Tax Short-Term Long-Term Depreciation $ (349,763 ) $ (127,489 ) $ — $ (127,489 ) Reserve for bad debts 15,801 5,759 5,759 — Reserve for returns 941,228 343,078 343,078 — Accrued returns 194,873 71,031 71,031 — Reserve for obsolete inventory 500,156 182,307 182,307 — Vacation accrual 29,528 10,763 10,763 — Alternative minimum tax carry forward — 20,000 — 20,000 Deferred compensation 304,945 111,153 — 111,153 Bonus obligations unpaid 304,355 110,937 110,937 — Restructuring costs 925,000 337,163 337,163 — Charitable contributions 584,558 213,071 96,249 116,822 Section 263A costs 79,539 28,992 28,992 — Loss carry forward 25,398,347 9,257,698 962,485 8,295,213 Net deferred tax asset $ 10,564,463 $ 2,148,764 $ 8,415,699 November 30, 2015 Classified As Type Amount Deferred Tax Short-Term Long-Term Depreciation $ (250,811 ) $ (92,558 ) $ — $ (92,558 ) Reserve for bad debts 4,911 1,812 1,812 — Reserve for returns 907,777 335,003 335,003 — Accrued returns 407,992 150,564 150,564 — Reserve for obsolete inventory 821,259 303,075 303,075 — Vacation accrual 35,955 13,269 13,269 — Bonus obligations unpaid 24,000 8,857 8,857 — Restructuring costs 1,264,218 466,544 466,544 — Charitable contributions 734,643 271,109 86,402 184,707 Section 263A costs 67,129 24,773 24,773 — Loss carry forward 27,022,986 9,972,473 864,023 9,108,450 Net deferred tax asset $ 11,454,921 $ 2,254,322 $ 9,200,599 The amounts recognized in the deferred tax asset are management's best estimate of the amount more likely than not to be realized and the actual results could differ from those estimates. In determining the amount more likely than not to be realized, management considered available information and determined the negative objective evidence, primarily recent losses offset by positive objective evidence, including the effects of current year restructuring expenses that will not recur, the savings of the related payroll and rent expense resulting from the restructuring and forecasts for future profitability. Future profitability in this competitive industry depends on the successful execution of management's initiatives designed to obtain sales levels and improve operating results. The inability to successfully execute these initiatives could reduce estimates of future profitability, which could affect the Company's ability to realize the deferred tax assets. Income tax(benefit) expense is made up of the following components: November 30, Continuing Operations 2016 2015 2014 Current tax - Federal $ 20,000 $ — $ — Current tax - State & Local 28,949 (2,795 ) 33,664 Deferred tax expense (benefit) 899,584 (1,589,514 ) (1,740,876 ) $ 948,533 $ (1,592,309 ) $ (1,707,212 ) November 30, Discontinued Operations 2016 2015 2014 Current tax - Federal $ — $ — $ — Current tax - State & Local — — — Deferred tax (benefit) expense (9,126 ) 6,073 (3,651,431 ) $ (9,126 ) $ 6,073 $ (3,651,431 ) Prepaid and refundable income taxes are made up of the following components: Prepaid and refundable income taxes Federal State & Total November 30, 2016 $ — $ 44,154 $ 44,154 November 30, 2015 $ — $ 70,056 $ 70,056 Income tax payable is made up of the following components: Income Taxes Payable Federal State & Total November 30, 2016 $ 20,000 $ — $ 20,000 November 30, 2015 $ — $ — $ — A reconciliation of the (benefit from) provision for income taxes computed at the statutory rate to the effective rate for the three years ended November 30, 2016 , 2015 and 2014 is as follows: 2016 2015 2014 Amount Percent of Pretax Income Amount Percent of Pretax Income Amount Percent of Pretax Income Continuing Operations Provision for (benefit from) income taxes at federal statutory rate $ 728,014 34.00 % $ (1,648,640 ) 34.00 % $ (1,533,618 ) 34.00 % Changes in provision for (benefit from) income taxes resulting from: State income taxes, net of federal income tax benefit 52,460 2.45 % (140,619 ) 2.90 % (130,809 ) 2.90 % Change in tax rate related to future deferred tax benefits 140,483 6.56 % — — % — — % Non-deductible expenses and other adjustments 27,576 1.29 % 196,950 (4.06 )% (42,785 ) 0.95 % Provision for (benefit from) income taxes at effective rate $ 948,533 44.30 % $ (1,592,309 ) 32.84 % $ (1,707,212 ) 37.85 % Discontinued Operations (Benefit from) provision for income taxes at federal statutory rate $ (7,004 ) 34.00 % $ 6,288 34.00 % $ (3,280,140 ) 34.00 % Changes in (benefit from) provision for income taxes resulting from: State income taxes, net of federal income tax benefit (505 ) 2.45 % 536 2.90 % $ (279,777 ) 2.90 % Non-deductible expenses and other adjustments (1,617 ) 7.85 % (751 ) (4.06 )% (91,514 ) 0.95 % (Benefit from) provision for income taxes at effective rate $ (9,126 ) 44.30 % $ 6,073 32.84 % $ (3,651,431 ) 37.85 % |