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Note 9 - Income Taxes | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
( 9 ) | Income Taxes
The Company’s income tax provision for the years ended December 31, 2017, 2016 and 2015 consists of the following (in thousands):
|  | Years Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 3,117 |  |  | $ | 3,120 |  |  | $ | 3,131 |
State |  |  | 551 |  |  |  | 651 |  |  |  | 580 |
|  |  | 3,668 |  |  |  | 3,771 |  |  |  | 3,711 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (1,091 | ) |  |  | 546 |  |  |  | 508 |
State |  |  | 72 |  |  |  | 30 |  |  |  | (71 | )
|  |  | (1,019 | ) |  |  | 576 |  |  |  | 437 |
Total income tax provision |  | $ | 2,649 |  |  | $ | 4,347 |  |  | $ | 4,148 |
The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):
|  | December 31,
|  | 2017 |  | 2016
Deferred tax assets: |  |  |  |  |  |  |  |
Reserves |  | $ | 398 |  |  | $ | 531 |
Inventory capitalization |  |  | 228 |  |  |  | 427 |
Compensation programs |  |  | 394 |  |  |  | 578 |
Retirement liability |  |  | 7 |  |  |  | 19 |
Equity-based compensation |  |  | 158 |  |  |  | 257 |
Net operating loss carryforwards |  |  | - |  |  |  | 40 |
Deferred rent |  |  | 6 |  |  |  | 7 |
Intangible assets |  |  | 274 |  |  |  | 340 |
Total deferred tax assets |  |  | 1,465 |  |  |  | 2,199 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Excess of book over tax basis of fixed assets |  |  | (3,305 | ) |  |  | (4,767 | )
Goodwill |  |  | (600 | ) |  |  | (891 | )
Total deferred tax liabilities |  |  | (3,905 | ) |  |  | (5,658 | )
Net long-term deferred tax liabilities |  | $ | (2,440 | ) |  | $ | (3,459 | )
The amounts recorded as deferred tax assets as of December 31, 2017 and 2016, represent the amount of tax benefits of existing deductible temporary differences or carryforwards that are more likely than not to be realized through the generation of sufficient future taxable income within the carryforward period. The Company has total deferred tax assets of $1.5 million at December 31, 2017, that it believes are more likely than not to be realized in the carryforward period. Management reviews the recoverability of deferred tax assets during each reporting period. The actual tax provision for the years presented differs from the “expected” tax provision for those years, computed by applying the U.S. federal corporate rate of 34.0% to income before income tax expense as follows:
|  | Years Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Computed “expected” tax rate |  |  | 34.0 | % |  |  | 34.0 | % |  |  | 34.0 | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net of federal tax benefit |  |  | 3.5 |  |  |  | 3.7 |  |  |  | 2.3 |
Meals and entertainment |  |  | 0.3 |  |  |  | 0.2 |  |  |  | 0.3 |
R&D credits |  |  | (0.6 | ) |  |  | (0.6 | ) |  |  | (0.8 | )
Domestic production deduction |  |  | (2.6 | ) |  |  | (2.5 | ) |  |  | (2.5 | )
Non-deductible ISO stock option expense |  |  | 0.1 |  |  |  | 0.3 |  |  |  | 0.4 |
Unrecognized tax benefits |  |  | - |  |  |  | (0.1 | ) |  |  | - |
Excess tax benefits on equity awards |  |  | (1.4 | ) |  |  | - |  |  |  | - |
Impact on deferred taxes of new legislation |  |  | (11.1 | ) |  |  | - |  |  |  | - |
Other |  |  | 0.1 |  |  |  | 0.3 |  |  |  | 1.6 |
Effective tax rate |  |  | 22.3 | % |  |  | 35.3 | % |  |  | 35.3 | %
On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “2017 Tax Act”), resulting in significant modifications to existing law. Our financial statements for the year ended December 31, 2017, reflect certain effects of the 2017 Tax Act in the fourth quarter of 2017, the period in which the legislation was enacted, which includes a reduction in the corporate tax rate from 35% to 21%. The interpretations of many provisions of the 2017 Tax Act are still unclear. We cannot predict when or to what extent any U.S. federal tax laws, regulations, interpretations, or rulings clarifying the 2017 Tax Act will be issued or the impact of any such guidance on us. It is also unclear how many U.S. states, if any, will incorporate these federal law changes, or portions thereof, into their tax codes. Any subsequent changes to state tax laws may impact our financial condition. Consistent with Staff Accounting Bulletin (“SAB”) No. 118 issued by the Securities and Exchange Commission (“SEC”), which provides for a measurement period of one year from the enactment date to finalize the accounting for effects of the 2017 Tax Act, the Company provisionally recorded an income tax benefit of $1.5 million related to the 2017 Tax Act, including remeasurement of its deferred tax assets and liabilities, and executive compensation limitations under Internal Revenue Code Section 162 (m), among others. The Internal Revenue Service is expected to issue additional guidance clarifying provisions of the Act. As additional guidance is issued, one or more of the provisional amounts may change. In accordance with SEC guidance, provisional amounts may be refined as a result of additional guidance from, and interpretations by, U.S. regulatory and standard-setting bodies, and changes in assumptions. In the subsequent period, provisional amounts will be adjusted for the effects, if any, of interpretative guidance issued after December 31, 2017, by the U.S. Department of the Treasury. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company has not been audited by any state for income taxes with the exception of returns filed in Michigan which have been audited through 2004, income tax returns filed in Massachusetts which have been audited through 2007, income tax returns filed in Florida which have been audited through 2009, income tax returns filed in New Jersey which have been audited through 2012, and income tax returns in Colorado which have been audited through 2013. Federal and state tax returns for the years 2014 through 2017 remain open to examination by the IRS and various state jurisdictions. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) resulting from uncertain tax positions is as follows (in thousands):
|  | December 31,
|  | 2017 |  | 2016
Gross UTB balance at beginning of fiscal year |  | $ | 150 |  |  | $ | 162 |
Reductions for tax positions of prior years |  |  | - |  |  |  | (12 | )
Gross UTB balance at end of fiscal year |  | $ | 150 |  |  | $ | 150 |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2017 and 2016 is $150,000 and $150,000, respectively. In addition, the total amount of accrued interest and penalties on uncertain tax positions at December 31, 2017 and 2016 is $153,000 and $153,000, respectively. At December 31, 2017, all of the unrecognized tax benefits relate to tax returns of a specific state jurisdiction that are currently under examination. Accordingly, the Company expects a reduction of this amount in 2018, as the examination is expected to close within the next 12 -months.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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