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INCOME TAXES

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7.

INCOME TAXES

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

For financial reporting purposes, income before income taxes were (dollars in thousands):

		2017				2016				2015

Income from before tax income taxes		$	3,139			$	3,202			$	2,306

The expense (benefit) for income taxes consists of (dollars in thousands):

			2017				2016				2015
Current:
Federal		$	1,098			$	1,121			$	807

Deferred and Other:
Federal		$	533			$	—			$	—

Total Tax Expense		$	1,631			$	1,121			$	807

The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory rate is as follows (dollars in thousands):

		2017				2016				2015

Income Tax Expense (Benefit) at Federal Statutory Rate		$	1,098			$	1,121			$	807
Repricing of Deferred Assets Due to Change in Future Rates			533				—				—

Reported Income Tax (Benefit) Expense			1,631				1,121				807

Effective Tax Rate			52	%			35	%			35	%

The company is subject to taxation in the United States and various states. As of December 31, 2017, the Company’s tax years for 2016, 2015, and 2014 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2017, the Company is no longer subject to U.S federal, state, or local examinations by tax authorities for the years before 2014.

The 2017 effective tax rate is a one-time artifact of the passing of the Tax Cuts and Jobs Act by congress. This act has reduced the statutory tax rate for corporations from 35% to 21% starting in 2018. As a result, the tax assets of IOT had to be re-priced to reflect the new rate for future years with the resulting impact on the 2017 provision for income taxes.

Components of the Net Deferred Tax Asset or Liability

		2017				2016

Allowance for losses on Notes		$	383			$	640
Installment Note on Land Sale			2,876				4,795
Installment Note from Affiliate on Land Sale			2,503				4,173
Subtotal			5,762				9,608
Less valuation allowance			—				—
Total Net Deferred Tax Asset		$	5,762			$	9,608

Basis Differences for Fixed Assets			4,770				7,950
Deferred Gain Differences			200				334
Total Deferred Tax Liability		$	4,970			$	8,284

Net Deferred Tax Asset			792				1,324

Current Net Deferred Tax Asset			5,179				8,634
Long-Term Net Deferred Tax Liability			4,387				7,310
Net Deferred Tax Asset		$	792			$	1,324

The change in the value of the net tax asset is entirely due to change of statutory rate from 35% to 21% for future years as a result of the Tax Cuts and Jobs Act.