| (8) Income Taxes | (8) Income Taxes Components of income tax expense (benefit)
for each year are as follows:
2018 2017
Current
Federal $ (67,956) $ (6,529)
State 456 (4,186)
Current income tax provision (benefit): (67,500) (10,715)
Deferred:
United States:
Federal 2,285,758 (246,458)
State 566,161 35,141
Deferred income tax provision (benefit), net 2,851,919 (211,317)
Total $ 2,784,419 $ (222,032) Deferred tax assets as of December 29, 2018
and December 30, 2017 are as follows:
December 39, 2018 December 30, 2017
Deferred Tax Assets:
Net operating loss
carryforwards $ 738,213 $ 634,000
Stock compensation 524,893 478,000
Credit carryforwards 1,365,068 1,494,000
Inventory 281,192 235,000
Accrued liabilities 21,615 20,000
Depreciation 215,936 175,000
Other 3,238 3,000
Gross deferred tax assets 3,150,155 3,039,000
Valuation allowance 2,963,155 —
Net deferred tax assets $ 187,000 $ 3,039,000 At December 29, 2018 and December 30, 2017 the Company had net operating
loss carryforwards of approximately $2,742,700 and $2,367,000, 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 expense of $680,000 in the fourth quarter of 2017. Despite the Company’s strong performance
in the fourth quarter and favorable outlook for the future, the Company established a valuation reserve as it is judged more likely
than not that all or a portion of the tax credits will not be used before they expire. This decision was reached after giving greater
weight to its losses over the last three years compared with its forecast of the future. A summary of the change in the deferred tax
asset is as follows:
2018 2017
Balance at beginning of year $ 3,038,666 $ 2,827,349
Deferred tax benefit (provision) 111,236 211,317
Valuation allowance (2,963,155) —
Balance at end of year $ 186,747 $ 3,038,666 Income tax expense is different from the amounts
computed by applying the U.S. federal statutory income tax rate of 21 percent to pretax income as a result of the following:
2018 2017
Tax at statutory rate $ (193,000) $ (660,000)
State tax, net
of federal benefit 450 450
Net operating loss and
credit carryforwards (68,857) (282,450)
Valuation allowance 2,962,902 —
Effect of tax cuts and jobs act — 628,000
Other 82,924 92,000
Total $ 2,784,419 $ (222,000) 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 2015 through 2018. |
