(

)

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	%

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%

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

$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

$153,000

and

$153,000,

respectively.

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

-months.