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Income tax provision | 12 Months Ended
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Oct. 31, 2019
Income tax provision |
Income tax provision | Note 9 - Income tax provision Reconciliation of provision (benefit) for income taxes for the years ended October 31, 2019 and 2018 are as follows (in thousands):
|  | 2019 |  | 2018
Continuing operations |  | $ | 1,036 |  | $ | 1,468
Discontinued operations |  |  | — |  |  | (41)
Net income |  | $ | 1,036 |  | $ | 1,427
The provision (benefit) for income taxes for the fiscal years ended October 31, 2019 and 2018 consists of the following (in thousands):
|  | 2019 |  | 2018
Current: |  |  |  |  |  |
Federal |  | $ | 859 |  | $ | 1,344
State |  |  | 220 |  |  | 236
|  |  | 1,079 |  |  | 1,580
Deferred: |  |  |  |  |  |
Federal |  |  | (25) |  |  | (112)
State |  |  | (18) |  |  | —
|  |  | (43) |  |  | (112)
|  | $ | 1,036 |  | $ | 1,468
Income tax at the federal statutory rate is reconciled to the Company’s actual net provision for income taxes as follows (in thousands, except percentages):
|  | 2019 |  | 2018 |
|  |  |  |  | % of Pretax |  |  |  |  | % of Pretax |
|  | Amount |  | Income |  | Amount |  | Income |
Income taxes at federal statutory rate |  | $ | 957 |  | 21.0 | % | $ | 1,737 |  | 38.1 | %
State tax provision, net of federal tax benefit |  |  | 160 |  | 3.5 | % |  | 170 |  | 3.7 | %
Nondeductible differences: |  |  |  |  |  |  |  |  |  |  |
Rel-Tech earn-out |  |  | — |  | 0.0 | % |  | (6) |  | (0.1) | %
Qualified domestic production activities deduction |  |  | — |  | 0.0 | % |  | (141) |  | (3.1) | %
Stock options |  |  | 21 |  | 0.5 | % |  | (204) |  | (4.5) | %
Meals and entertainment |  |  | 8 |  | 0.2 | % |  | 8 |  | 0.2 | %
R&D credits |  |  | (119) |  | (2.6) | % |  | (111) |  | (2.4) | %
ASC 740-10 Liability |  |  | 21 |  | 0.5 | % |  | 54 |  | 1.2 | %
Tax Cut and Jobs Act |  |  | — |  | 0.0 | % |  | (34) |  | (0.7) | %
Other |  |  | (12) |  | (0.3) | % |  | (5) |  | (0.1) | %
|  | $ | 1,036 |  | 22.8 | % | $ | 1,468 |  | 32.3 | %
The Company’s total deferred tax assets and deferred tax liabilities at October 31, 2019 and 2018 are as follows (in thousands):
|  | 2019 |  | 2018
Deferred Tax Assets: |  |  |  |  |  |
Reserves |  | $ | 172 |  | $ | 276
Accrued vacation |  |  | 97 |  |  | 116
Stock-based compensation awards |  |  | 87 |  |  | 113
Uniform capitalization |  |  | 64 |  |  | 78
Other |  |  | 55 |  |  | 93
Total deferred tax assets |  |  | 475 |  |  | 676
Deferred Tax Liabilities: |  |  |  |  |  |
Amortization / intangible assets |  |  | (307) |  |  | (544)
Depreciation / equipment and furnishings |  |  | (125) |  |  | (132)
Total deferred tax liabilities |  |  | (432) |  |  | (676)
Total net deferred tax assets (liabilities) |  | $ | 43 |  | $ | —
On December 22, 2017, the U.S. President signed the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act, among other things, lowered the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As a result, we previously recorded a provisional estimate of the effect of the Tax Act in our financial statements. In the first quarter of 2019, we completed our analysis to determine the effect of the Tax Act and recorded no additional adjustments as of December 22, 2018. Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined it is more likely than not that the assets will be realized in future tax years. The provision for income taxes from continuing operations was $1.0 million or 22.7% and $1.5 million or 19.6% of income before income taxes for fiscal 2019 and 2018, respectively. The increase in the effective income tax rate from year to year is primarily driven by the elimination of the benefit from the domestic production activities deduction, the one-time benefit recorded in the prior year related to the reduction in the Company’s deferred tax liability due to the change in the federal tax rate, both as a result of the Tax Act, and the impact of share-based compensation excess tax benefits recognized which vary from year to year depending on the Company’s share price in each period. The Company recorded income from discontinued operations, net of tax, for fiscal 2018 as disclosed in Note 3. The Company’s adjustments to its uncertain tax positions in fiscal years ended October 31, 2019 and 2018 are as follows:
|  | 2019 |  | 2018
Balance, at beginning of year |  | $ | 59 |  | $ | —
Increase for tax positions related to the current year |  |  | 23 |  |  | 24
Increase for tax positions related to prior years |  |  | 3 |  |  | 29
Increase for interest and penalties |  |  | 2 |  |  | 6
Statute of Limitations Expirations |  |  | (7) |  |  | —
Balance, at end of year |  | $ | 80 |  | $ | 59
The Company had gross unrecognized tax benefits of $72,000 and $53,000 attributable to its U.S. federal and California research tax credits as of October 31, 2019 and 2018, respectively. During fiscal 2019, the increase in the Company’s gross unrecognized tax benefit was primarily related to claiming additional federal and California research tax credits. The uncertain tax benefit is recorded as income taxes payable in the Company’s consolidated balance sheet. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company recognized expense of approximately $2,000 and $6,000 during the years ended October 31, 2019 and 2018, respectively. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, it is possible that certain changes may occur within the next twelve months, but the Company does not anticipate that its accrual for uncertain tax positions will change by a material amount over the next twelve-month period. The Company is subject to taxation in the United States and state jurisdictions. The Company’s tax years for October 31, 2015 and forward are subject to examination by the United States and October 31, 2014 and forward with state tax authorities.

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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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