16. INCOME TAXES

Our income tax expense (benefit) aggregated $461,620 and ($270,333) (amounting to 25% and (62%) of our loss before income taxes, respectively) for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, we had federal net operating loss carryforwards of $11,839,349 of which $10,127,442 does not expire and $1,711,907 expires in 2034 through 2037 (if not utilized before then) and state net operating loss carryforwards of $3,485,949 that expire in 2037 through 2038 (if not utilized before then). Additionally, we had federal general business tax credit carryforwards of $407,023 that expire in 2027 through 2038 (if not utilized before then) and state tax credit carryforwards of $763,350 that expire in 2023 through 2038 (if not utilized before then).

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. During the second quarter of 2018, we assessed our historical and near-term future profitability and recorded $563,252 in non-cash income tax expense to create a full valuation allowance against our net deferred tax assets (which consist largely of net operating loss carryforwards and federal and state credits). At that time, we had incurred a net loss for six consecutive quarters, had not been profitable on a year-to-date basis since the nine-month period ended September 30, 2017 and projected additional net losses for some period going forward before returning to profitability.

Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined.

The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.

The income tax provision consisted of the following:

	During the Year Ended December 31,
	2018			2017
Current
Federal	$	—		$	—
State		(820	)		14,476
Current subtotal		(820	)		14,476
Deferred
Federal		(274,495	)		(173,180	)
State		(504,072	)		(111,629	)
Deferred subtotal, gross		(778,567	)		(284,809	)
Valuation allowance		1,241,007			—
Deferred subtotal, net		462,440			(284,809	)
Income tax expense (benefit)	$	461,620		$	(270,333	)

The actual income tax expense (benefit) differs from the expected tax computed by applying the U.S. federal corporate tax rate of 21% and 34% to the loss before income taxes during the years ended December 31, 2018 and 2017 respectively, as follows:

	During the Year Ended December 31,
	2018						2017
	$			%			$			%
Computed expected tax benefit/rate	$	(390,610	)		(21.00	)%	$	(149,083	)		(34.00	)%
State income taxes, net of federal expense		136,843			7.36			30,089			6.86
Share-based compensation		67,181			3.61			55,955			12.76
Tax credits		(602,813	)		(32.41	)		(137,983	)		(31.47	)
Deferred tax statutory rate change		—			—			(71,034	)		(16.20	)
Valuation allowance		1,241,007			66.72			—			—
Other		10,012			0.54			1,723			0.40
Income tax expense (benefit)/rate	$	461,620			24.82	%	$	(270,333	)		(61.65	)%

The Tax Cuts and Jobs Act was enacted on December 22, 2017. This legislation made significant changes in the U.S. tax laws including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the prior rate of 34% to 21%. As a result of the enacted law, we were required to revalue deferred tax assets and liabilities at the rate enacted in 2017. This revaluation resulted in a benefit of $71,000 to income tax expense in continuing operations and a corresponding increase in the deferred tax assets during 2017. On December 22, 2017, the SEC issued Staff Accounting Bulletin #118 that provides additional guidance and allows companies to apply a measurement period of up to twelve months to account for the impacts of this legislation in their financial statements. The accounting for the transitional impacts of this legislation is now complete.

The significant components of our deferred tax assets, net, consisted of the following:

	As of December 31,
	2018			2017
Product rights	$	14,226		$	29,261
Property, plant and equipment		(2,534,799	)		(527,186	)
Federal general business tax credits		407,023			335,486
Federal net operating loss carryforwards		2,486,263			359,764
State tax credits carryover		845,967			242,244
Interest rate swaps		(10,052	)		233
Prepaid expenses and other		13,354			16,355
UNICAP		19,025			16,569
Valuation allowance		(1,241,007	)		—
Deferred tax assets, net	$	—		$	472,726