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, 2017 and November 30, 2016 . 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 2013 through 2016 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, 2017 . The alternative minimum tax, deferred compensation and net operating loss portion of the deferred tax asset has $7,422,331 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, 2017 . In November 2015, the FASB issued ASU 2015-17, which is an update to Topic 740, "Income Taxes". The update will require that all deferred tax assets and liabilities be classified as non-current. The update is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2016. ASU 2015-17 will have a material impact on the Company's balance sheet, as the deferred tax reported as a current asset will be reported as a non-current asset once the update is effective, resulting in a decrease to the Company's current ratio. As of November 30, 2017, the Company reported $2,079,988 of deferred tax as a current asset. The Company will be reporting all deferred tax assets as a non-current asset beginning with the first quarter of fiscal 2018. It is not expected to have a material impact on the Company's results of operations. At November 30, 2017 and November 30, 2016 , respectively, the Company had temporary differences arising from the following: November 30, 2017 Classified As Type Amount Deferred Tax Short-Term Long-Term Depreciation $ (378,580 ) $ (137,992 ) $ — $ (137,992 ) Reserve for bad debts 6,629 2,416 2,416 — Reserve for returns 246,513 89,854 89,854 — Accrued returns 109,646 39,966 39,966 — Reserve for obsolete inventory 158,269 57,689 57,689 — Vacation accrual 70,856 25,827 25,827 — Alternative minimum tax carry forward — 122,360 — 122,360 Deferred compensation 487,061 177,534 — 177,534 Bonus obligations unpaid 400,166 145,861 145,861 — Charitable contributions 305,633 111,403 111,403 — Section 263A costs 48,317 17,612 17,612 — Loss carry forward 24,279,259 8,849,789 1,589,360 7,260,429 Net deferred tax asset $ 9,502,319 $ 2,079,988 $ 7,422,331 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 As a result of the enactment by the United States Government of public law 115-97, an Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (formerly known as the Tax Cut and Jobs Act of 2017), federal corporate tax rates for periods beginning after January 1, 2018 have been reduced to 21% . The Company's federal rate was previously 34% . This will result in a reduction of the value of the deferred tax assets and a corresponding increase in the provision for income tax to be recorded in the first quarter of fiscal 2018. In addition, ASU 2015-17 is effective with the first quarter of fiscal 2018 and will require that all deferred tax assets be classified as long-term. Please see Note 19, Subsequent Events for further information regarding the effects of the federal corporate tax rate change. Please see Note 2, Accounting Policies, Recent Accounting Pronouncements for further information regarding ASU 2015-17. 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 all available information. 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. A substantial portion of the deferred tax asset is the loss carry forward as a result of losses incurred by the Company is fiscal 2015 and earlier periods. If the Company does not meet its objectives, it could also result in taking a longer period of time for the net operating loss carry forward to be utilized. Income tax expense (benefit) is made up of the following components: November 30, Continuing Operations 2017 2016 2015 Current tax - Federal $ 105,770 $ 20,000 $ — Current tax - State & Local 5,640 28,949 (2,795 ) Deferred tax expense (benefit) 1,062,144 899,584 (1,589,514 ) $ 1,173,554 $ 948,533 $ (1,592,309 ) November 30, Discontinued Operations 2017 2016 2015 Current tax - Federal $ — $ — $ — Current tax - State & Local — — — Deferred tax (benefit) expense — (9,126 ) 6,073 $ — $ (9,126 ) $ 6,073 Prepaid and refundable income taxes are made up of the following components: Prepaid and refundable income taxes Federal State & Total November 30, 2017 $ 1,015 $ 37,138 $ 38,153 November 30, 2016 $ — $ 44,154 $ 44,154 Income tax payable is made up of the following components: Income Taxes Payable Federal State & Total November 30, 2017 $ — $ — $ — November 30, 2016 $ 20,000 $ — $ 20,000 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, 2017 , 2016 and 2015 is as follows: 2017 2016 2015 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 $ 1,021,610 34.00 % $ 728,014 34.00 % $ (1,648,640 ) 34.00 % Changes in provision for (benefit from) income taxes resulting from: State income taxes, net of federal income tax benefit 73,616 2.45 % 52,460 2.45 % (140,619 ) 2.90 % Change in tax rate related to future deferred tax benefits — — % 140,483 6.56 % — — % Non-deductible expenses and other adjustments 78,328 2.61 % 27,576 1.29 % 196,950 0.95 % Provision for (benefit from) income taxes at effective rate $ 1,173,554 39.06 % $ 948,533 44.30 % $ (1,592,309 ) 37.85 % Discontinued Operations (Benefit from) provision for income taxes at federal statutory rate $ — — % $ (7,004 ) 34.00 % $ 6,288 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 % Non-deductible expenses and other adjustments — — % (1,617 ) 7.85 % (751 ) (4.06 )% (Benefit from) provision for income taxes at effective rate $ — — % $ (9,126 ) 44.30 % $ 6,073 32.84 % |