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INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 6.

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):

		Years Ended December 31,
		2018				2017				2016

Income before income taxes		$	10,393			$	3,139			$	3,202

For the year ended December 31, 2018, the book-tax difference is due to a temporary difference in taxable gain of approximately $7.3 million.

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

		Years Ended December 31,
		2018				2017				2016

Current:
Federal		$	1,391			$	1,098			$	1,121

Deferred and Other:
Federal			792				533				—
Total Tax Expense		$	2,183			$	1,631			$	1,121

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

		Years Ended December 31,
		2018				2017				2016

Income Tax Expense at Federal Statutory Rate		$	2,183			$	1,098			$	1,121
Repricing of Deferred Assets Due to Change in Future Rates			—				533				—
Reported Income Tax Expense		$	2,183			$	1,631			$	1,121
Effective Tax Rate			21.0	%			52	%			35	%

The company is subject to taxation in the United States and various states. As of December 31, 2018, the Company’s tax years for 2017, 2016, and 2015 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2018, the Company is no longer subject to U.S federal, state, or local examinations by tax authorities for the years ended before 2015.

On December 22, 2017, President Trump signed into law the Tax Act that significantly changes the United States federal income tax system. The Tax Act includes a number of changes in existing law including a permanent reduction in the federal income tax rate from 35% to 21%. The rate reduction took effect on January 1, 2018. As a result of the reduction in the federal income tax rate to 21% and other changes under the Tax Act that impact timing differences, 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

		Years Ended December 31,
		2018				2017
		(In thousands)
Deferred Tax Assets:
Allowance for losses on Notes		$	—			$	383
Installment Note on Land Sale			—				2,876
Installment Note from Affiliate on Land Sale			—				2,503
Total Deferred Tax Assets		$	—			$	5,762
Less: Valuation Allowance							—
Total Net Deferred Tax Assets		$	—			$	5,762

Deferred Tax Liabilities:
Basis Differences for Fixed Assets		$	—			$	4,770
Deferred Gain Differences			—				200
Total Deferred Tax Liability		$	—			$	4,970

Net Deferred Tax Asset		$	—			$	792

Current Net Deferred Tax Asset		$	—			$	5,179
Long-Term Net Deferred Tax Liability			—				4,387
Net Deferred Tax Asset		$	—			$	792

With the disposition of all assets that could generate a deferred tax asset, there were no net deferred tax assets available at December 31, 2018.