Income Taxes

12 Months Ended

Dec. 31, 2018

The components of the Company's net deferred tax assets at December 31 are as follows:


	2018		2017

Deferred Tax Assets
Net operating loss and tax credits	$	16,410,403	$	15,295,547
Property and equipment and intangibles	236,318		232,667
Allowance for accounts receivable	251,068		129,180
Reserve for expired product	558,484		538,141
Inventory	193,150		173,885
Deferred charges	910,577		624,367
Cumulative compensation costs incurred on deductible equity awards	884,049		793,206
Total deferred tax assets	19,444,049		17,786,993

Deferred Tax Liabilities
Intangible assets	(1,974,787)		(2,067,548)
Net deferred tax assets, before valuation allowance	17,469,262		15,719,445
Less: deferred tax asset valuation allowance	(17,382,052)		(15,632,235)
Net deferred tax assets	$	87,210	$	87,210

The following table summarizes the amount and year of expiration of the Company's federal and state net operating loss carryforwards as of December 31, 2018:


Years of expiration	Federal		State

2019	$	—	$	238,047
2020 - 2028	—		38,886,662
2029	44,153,819		10,508,184
2030 - 2037	7,534,351		9,617,093
Indefinite Period	3,918,317		137,040

Total federal and state net operating loss carryforwards	$	55,606,487	$	59,387,026

Income tax (expense) benefit includes the following components for the years ended December 31:


	2018		2017		2016

Current:
Federal	$	—	$	—	$	867,041
State and other	(16,636)		(59,243)		83,463
Total current income tax (expense) benefit	(16,636)		(59,243)		950,504

Deferred:
Federal	—		(3,682,772)		(537,965)
State	—		(432,874)		(81,615)
Total deferred income tax (expense) benefit	—		(4,115,646)		(619,580)
Total income tax (expense) benefit	$	(16,636)	$	(4,174,889)	$	330,924

The Company’s effective income tax rate for 2018, 2017 and 2016 reconciles with the federal statutory tax rate as follows:


	2018		2017		2016

Federal tax expense at statutory rate	21	%	34	%	34	%
State income tax expense (net of federal income tax benefit)	4	%	4	%	4	%
Permanent differences associated with general business credits	1	%	1	%	5	%
Change in valuation allowance	(25)	%	(148)	%	(15)	%
Change in tax rate	—	%	2	%	—	%
Other permanent differences	(1)	%	1	%	(2)	%
Other	—	%	(2)	%	(1)	%
Net income tax expense	—	%	(108)	%	25	%

In 2017, the Company determined that it was not more likely than not that its net deferred tax assets would be realized. As such, the Company’s income tax provision for the year ended December 31, 2017 reflected a full valuation allowance against net deferred tax assets with the exception of the deferred tax asset for alternative minimum tax (“AMT”) credit carryforwards discussed further below. The Company’s position is unchanged as of December 31, 2018.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“the Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate to 21%; (2) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (3) capital expensing; and (4) creating new limitations on deductible interest expense and executive compensation.

In connection with our analysis of the impact of the Tax Act, we recorded a net tax benefit of $0.1 million in the period ended December 31, 2017. This net tax benefit consisted entirely of the release of the valuation allowance against AMT credits that will be realizable under the Tax Act in future periods. While the Company does not expect to record further amounts related to the Tax Act, we will continue to evaluate additional guidance as it is released by the Internal Revenue Service and will record additional amounts if needed.

The Company expects it will continue to pay minimal taxes in future periods through the continued utilization of net operating loss carryforwards, as it is able to achieve taxable income through its operations.

Federal tax years that remain open to examination are 2012 through 2017. Due to a 2009 net operating loss carryback, federal tax years 2006 through 2008 remain open to the extent of net operating losses utilized in those years. During 2012, the 2009 federal tax return was examined by the Internal Revenue Service with no significant findings or adjustments. State tax years that remain open to examination are 2011 to 2017. The Company has no unrecognized tax benefits in 2018, 2017 and 2016.