| (8) Income Taxes | (8) Income Taxes Components of income tax expense (benefit)
for each year are as follows:
2017 2016 2015
Current
Federal $ (6,529) $ — $ (2,286)
State (4,186) 456 456
Current income tax provision (benefit): (10,715) 456 (1,830)
Deferred:
United States:
Federal (246,458) (526,922) 168,371
State 35,597 (149,678) 7,691
Deferred income tax provision (benefit), net (211,317) (676,600) 176,062
Total $ (222,032) $ (676,144) $ 174,232 Deferred tax assets as of December 30, 2017
and December 31, 2016 are as follows:
December 30, 2017 December 31, 2016
Deferred Tax Assets:
Net operating loss
carryforwards $ 634,000 $ 363,000
Stock compensation 478,000 628,000
Credit carryforwards 1,494,000 1,265,000
Inventory 235,000 369,000
Accrued liabilities 20,000 27,000
Depreciation 175,000 171,000
Other 3,000 4,000
Gross deferred tax assets 3,039,000 2,827,000
Valuation allowance — —
Net deferred tax assets $ 3,039,000 $ 2,827,000 At December 30, 2017 and December 31, 2016 the Company had net operating
loss carryforwards of approximately $2,367,000 and $923,000, respectively, available to offset future income for U.S. Federal income
tax purposes. On December 22, 2017, the President of the United States signed into
law the Tax Cuts and Jobs Act (“the Act”). The Act makes significant changes to the U.S. tax code including the following:
· Reduction of the corporate federal income tax rate
from 35% to 21%;
· Repeal of the domestic manufacturing deduction;
· Repeal of the corporate alternative minimum tax;
· Acceleration of business asset expensing. Due to the Act, U.S. deferred tax assets and liabilities were re-measured
from 35% to 21% resulting in an additional expense of $680,000 in the fourth quarter of 2017. A valuation allowance is required to be established
or maintained when it is "more likely than not" that all or a portion of deferred tax assets will not be realized. The
Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining deferred
tax assets. Current projections of future taxable income, including the reversal of temporary differences, reflect the Company’s
belief that it has attractive growth opportunities and a favorable cost structure. These projections support the conclusion that
the Company will generate taxable income sufficient to utilize the losses before they expire. A summary of the change in the deferred tax
asset is as follows:
2017 2016 2015
Balance at beginning of year $ 2,827,349 $ 2,150,749 $ 2,300,465
Deferred tax (expense) benefit 211,317 676,600 (149,716)
Balance at end of year $ 3,038,666 $ 2,827,349 $ 2, 150,749 Income tax expense is different from the amounts
computed by applying the U.S. federal statutory income tax rate of 34 percent to pretax income as a result of the following:
2017 2016 2015
Tax at statutory rate $ (660,000) $ (384,000) $ 212,000
State tax, net
of federal benefit 450 450 450
Net operating loss and
credit carryforwards (282,450) (249,450) (34,450)
Effect of tax cuts and jobs act 628,000 — —
Other 92,000 (43,000) (4,000)
Total $ (222,000) $ (676,000) $ 174,000 The Company’s income tax filings are
subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under the applicable
statutes of limitations for the years 2014 through 2017. |
