NOTE 9 - INCOME TAXES
|12 Months Ended|
Dec. 31, 2017
|Income Tax Disclosure [Abstract]|
|Income Tax Disclosure [Text Block]||
NOTE 9 – INCOME TAXES
The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income. The Company has federal net operating loss (“NOL”) carryforwards of approximately $6,849,000 as of December 31, 2017, which is subject to limitations under Section 382 of the Internal Revenue Code. These carryforward losses are available to offset future taxable income, and begin to expire in the year 2024 to 2034.
The foregoing amounts are management’s estimates and the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually obtaining and fulfilling new profitable sales agreements and modifying products. The inability to obtain new profitable contracts could reduce estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets.
Significant components of the Company’s deferred tax assets and liabilities are summarized as follows:
The 2017 Tax Cuts and Jobs Act (“Tax Reform”) was enacted on December 22, 2017. The Tax Reform includes a number of changes in existing tax law impacting businesses including a permanent reduction in the U.S. federal statutory rate from 34% to 21%, effective on January 1, 2018. Under U.S. GAAP, changes in tax rates and tax law are accounted for in the period of enactment and deferred tax assets and liabilities are measured at the enacted tax rate. The rate reconciliation includes the Company’s assessment of the accounting under the Tax Reform which is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Accordingly, the Company has determined a preliminary $934,000 of tax provision related to Tax Reform. This initial assessment is subject to adjustment in future periods for factors including the completion of federal and state tax returns for 2017 and finalization of gross deferred tax differences, future interpretive guidance expected to be issued by U.S. Treasury, future interpretive guidance issued by states regarding conformity with the Internal Revenue Code provisions as of December 31, 2017, ongoing IRS examinations and the additional time required to refine calculations.
For the year ended December 31, 2017, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to change in federal statutory rate described above and Incentive Stock Options (ISO) and 50% of general meal and entertainment expense which are not tax deductible. The total provision for the year ended December 31, 2017 was $1,394,031.
For the year ended December 31, 2016, the Company’s Federal and State provision requirements were offset by the reversal of a significant portion of our valuation allowance, no longer deemed necessary, taking into consideration Section 382 limitations. The Company recorded a tax benefit of $2,563,637, which represents a reduction in its valuation allowance on tax attributes that are expected to be utilized based on management’s assessment and evaluation of current and projected income. Additionally, the tax return to provision true-up of prior year taxes owed was a result of over accrual of taxes for the 2015 tax year.
A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2017 and 2016:
Income tax provision (benefit):
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef