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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
( 10 ) | Income Taxes
The Company’s income tax provision for the years ended December 31, 2018, 2017 and 2016 consists of the following (in thousands):
|  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Current |  |  |  |  |  |
Federal |  | $ | 1,772 |  |  | $ | 3,117 |  |  | $ | 3,120 |
State |  |  | 439 |  |  |  | 551 |  |  |  | 651 |
|  |  | 2,211 |  |  |  | 3,668 |  |  |  | 3,771 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 1,917 |  |  |  | (1,091 | ) |  |  | 546 |
State |  |  | (36 | ) |  |  | 72 |  |  |  | 30 |
|  |  | 1,881 |  |  |  | (1,019 | ) |  |  | 576 |
Total income tax provision |  | $ | 4,092 |  |  | $ | 2,649 |  |  | $ | 4,347 |
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,
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |  |  |
Reserves |  | $ | 367 |  |  | $ | 398 |
Inventory capitalization |  |  | 421 |  |  |  | 228 |
Compensation programs |  |  | 447 |  |  |  | 394 |
Retirement liability |  |  | 2 |  |  |  | 7 |
Equity-based compensation |  |  | 290 |  |  |  | 158 |
Deferred rent |  |  | 11 |  |  |  | 6 |
Intangible assets |  |  | 141 |  |  |  | 274 |
Tax credits |  |  | 257 |  |  |  | - |
Total deferred tax assets |  |  | 1,936 |  |  |  | 1,465 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Excess of book over tax basis of fixed assets |  |  | (4,668 | ) |  |  | (3,305 | )
Goodwill |  |  | (1,397 | ) |  |  | (600 | )
Total deferred tax liabilities |  |  | (6,065 | ) |  |  | (3,905 | )
Net long-term deferred tax liabilities |  | $ | (4,129 | ) |  | $ | (2,440 | )
The amounts recorded as deferred tax assets as of December 31, 2018 and 2017, 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 approximately $1.9 million at December 31, 2018, 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 Company has approximately $325,000 of tax credit carryforwards related to one state jurisdiction that expire in 2022. 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 21% to income before income tax expense as follows:
|  | Years Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Computed “expected” tax rate |  |  | 21.0 | % |  |  | 34.0 | % |  |  | 34.0 | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State taxes, net of federal tax benefit |  |  | 2.8 |  |  |  | 3.5 |  |  |  | 3.7 |
Meals and entertainment |  |  | 0.2 |  |  |  | 0.3 |  |  |  | 0.2 |
Tax credits |  |  | (1.9 | ) |  |  | (0.6 | ) |  |  | (0.6 | )
Domestic production deduction |  |  | - |  |  |  | (2.6 | ) |  |  | (2.5 | )
Non-deductible ISO stock option expense |  |  | 0.1 |  |  |  | 0.1 |  |  |  | 0.3 |
Unrecognized tax benefits |  |  | - |  |  |  | - |  |  |  | (0.1 | )
Excess tax benefits on equity awards |  |  | (1.3 | ) |  |  | (1.4 | ) |  |  | - |
Excess compensation |  |  | 0.8 |  |  |  | - |  |  |  | - |
Impact on deferred taxes of new legislation |  |  | - |  |  |  | (11.1 | ) |  |  | - |
Other |  |  | 0.5 |  |  |  | 0.1 |  |  |  | 0.3 |
Effective tax rate |  |  | 22.2 | % |  |  | 22.3 | % |  |  | 35.3 | %
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. Income tax returns in Colorado are currently being audited for the years 2014 through 2017. Federal and state tax returns for the years 2015 through 2018 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,
|  | 2018 |  | 2017
Gross UTB balance at beginning of fiscal year |  | $ | 150 |  |  | $ | 150 |
Reductions for tax positions of prior years |  |  | - |  |  |  | - |
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, 2018 and 2017 is $150,000 and $150,000, respectively. In addition, the total amount of accrued interest and penalties on uncertain tax positions at December 31, 2018 and 2017 is $153,000 and $153,000, respectively. At December 31, 2018, all of the unrecognized tax benefits relate to tax returns of a specific state jurisdiction that are currently under examination. On January 17, 2019 the Company came to an agreement with the state and on February 21, 2019 the Company received a check in the amount of $156,000 as settlement of the unrecognized tax benefits. Therefore, the Company anticipates a reduction to zero of its gross UTB balance in the first quarter of 2019. 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. Also on this date, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 118 to provide guidance to companies on how to implement the accounting and disclosure changes in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of H.R.1, also known as the 2017 Tax Act. Consistent with SAB 118, 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. As of December 31, 2018, the Company has completed its assessment of the total impact of the 2017 Tax Act, which resulted in a reduction in our deferred tax assets and liabilities for the change in the domestic tax rate and a reduction of deferred tax assets related to executive stock-based compensation that would not be realized under the provisions of Internal Revenue Code Section 162 (m). In 2018, we revised our overall reduction in our deferred tax assets by $50,000 to reflect our analysis over stock- based compensation.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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