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INCOME TAXES | 12 Months Ended
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Dec. 31, 2015
INCOME TAXES |
INCOME TAXES | NOTE 4 INCOME TAXES The income tax (benefit) expense for the years ended December 31, 2015 and 2014 consists of the following:
|  | 2015 |  | 2014 |
Current taxes—Federal |  | $ | (297,000 | ) | $ | (106,000 | )
Current taxes—State |  |  | 6,000 |  |  | 39,000 |
Current taxes—Foreign |  |  | 29,000 |  |  | 51,000 |
Deferred taxes—Federal |  |  | (107,000 | ) |  | 137,000 |
Deferred taxes—State |  |  | 53,000 |  |  | (40,000 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax (benefit) expense |  | $ | (316,000 | ) | $ | 81,000 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The statutory rate reconciliation for the years ended December 31, 2015 and 2014 is as follows:
|  | 2015 |  | 2014 |
Statutory federal tax provision |  | $ | (302,000 | ) | $ | 327,000 |
State income taxes |  |  | 3,000 |  |  | 45,000 |
Effect of foreign operations |  |  | (5,000 | ) |  | (9,000 | )
Uncertain tax positions |  |  | (3,000 | ) |  | (88,000 | )
Income tax credits |  |  | (125,000 | ) |  | (215,000 | )
Valuation allowance |  |  | 86,000 |  |  | — |
Permanent differences |  |  | 30,000 |  |  | 21,000 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax (benefit) expense |  | $ | (316,000 | ) | $ | 81,000 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income (loss) from operations before income taxes was derived from the following sources:
|  | 2015 |  | 2014 |
Domestic |  | $ | (968,793 | ) | $ | 816,840 |
Foreign |  |  | 81,371 |  |  | 144,177 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  | $ | (887,422 | ) | $ | 961,017 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax assets (liabilities) at December 31, 2015 and 2014, consist of the following:
|  | 2015 |  | 2014 |
Allowance for uncollectable accounts |  | $ | 115,000 |  | $ | 50,000 |
Inventories reserve |  |  | 270,000 |  |  | 267,000 |
Accrued vacation |  |  | 360,000 |  |  | 334,000 |
Non-compete amortization |  |  | 191,000 |  |  | 222,000 |
Stock-based compensation and equity appreciation rights |  |  | 111,000 |  |  | 148,000 |
State Tax NOL |  |  | 113,000 |  |  | 95,000 |
Tax credit carryforwards |  |  | 231,000 |  |  | 73,000 |
Other |  |  | 180,000 |  |  | 94,000 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 1,571,000 |  |  | 1,283,000 |
Valuation allowance |  |  | (86,000 | ) |  | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax assets |  |  | 1,485,000 |  |  | 1,283,000 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Prepaid expenses |  |  | (481,000 | ) |  | (292,000 | )
Property and equipment |  |  | (663,000 | ) |  | (704,000 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax liabilities |  |  | (1,144,000 | ) |  | (996,000 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net deferred tax assets |  | $ | 341,000 |  | $ | 287,000 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
We established a valuation allowance because we determined that it was more likely than not that a portion of the NOL and R&D credit would not be utilized. For 2014, our long term deferred tax liability of $149,000 has been netted with our current deferred tax asset or $436,000 for a net noncurrent deferred tax asset of $286,000. The tax effects from an uncertain tax positions can be recognized in our consolidated financial statements, only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31, 2015 and 2014:
Balance as of December 31, 2013 |  | $ | 193,000 |
Tax positions related to 2014: |  |  |  |
Additions |  |  | 23,000 |
Reductions |  |  | (160,000 | )
​ | ​ | ​ | ​ | ​
Balance as of December 31, 2014 |  |  | 56,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Tax positions related to current year: |  |  |  |
Additions based on tax positions related to the current year |  |  | 12,000 |
Additions based on tax[ib]-positions related to a prior year |  |  | 2,000 |
Reductions based on tax positions related to a prior year |  |  | (9,000 | )
Statute of limitations |  |  | (10,000 | )
​ | ​ | ​ | ​ | ​
Balance as of December 31, 2015 |  | $ | 51,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
The $51,000 of unrecognized tax benefits as of December 31, 2015 includes amounts which, if ultimately recognized, will reduce our annual effective tax rate. It is included in Other Long-Term Liabilities on the accompanying consolidated balance sheets. Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of December 31, 2015 and 2014 was not significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns. We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 + Details
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