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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Taxes |
Income Taxes | NOTE 4 - Income Taxes The income tax expense (benefit) for the years ended December 31, 2016 and 2015 consists of the following:
|  | 2016 |  | 2015 |
Current taxes - Federal |  | $ | 240,000 |  | $ | (297,000 | )
Current taxes - State |  | 10,000 |  | 6,000 |
Current taxes - Foreign |  | (13,000 | ) | 29,000 |
Deferred taxes - Federal |  | (167,000 | ) | (107,000 | )
Deferred taxes - State |  | 10,000 |  | 53,000 |
Deferred taxes - Foreign |  | (45,000 | ) | — |
Income tax expense (benefit) |  | $ | 35,000 |  | $ | (316,000 | )
The statutory rate reconciliation for the years ended December 31, 2016 and 2015 is as follows:
|  | 2016 |  | 2015 |
Statutory federal tax provision (benefit) |  | $ | 27,000 |  | $ | (302,000 | )
State income taxes |  | (32,000 | ) | 3,000 |
Effect of foreign operations |  | 107,000 |  | (5,000 | )
Uncertain tax positions |  | 2,000 |  | (3,000 | )
Income tax credits |  | (134,000 | ) | (125,000 | )
Valuation allowance |  | 49,000 |  | 86,000 |
Permanent differences |  | 16,000 |  | 30,000 |
Other |  | — |  | — |
Income tax expense (benefit) |  | $ | 35,000 |  | $ | (316,000 | )
Income (loss) from operations before income taxes was derived from the following sources:
|  | 2016 |  | 2015 |
Domestic |  | $ | 486,425 |  | $ | (968,793 | )
Foreign |  | (407,651 | ) | 81,371 |
Total |  | $ | 78,774 |  | $ | (887,422 | )
Deferred tax assets (liabilities) at December 31, 2016 and 2015, consist of the following:
|  | 2016 |  | 2015 |
Deferred Tax |  |  |  |  |
Allowance for uncollectable accounts |  | $ | 317,000 |  | $ | 115,000 |
Inventories reserve |  | 242,000 |  | 270,000 |
Accrued vacation |  | 362,000 |  | 360,000 |
Non-compete amortization |  | 56,000 |  | 191,000 |
Stock-based compensation and equity appreciation rights |  | 29,000 |  | 111,000 |
Net operating loss carryforwards |  | 134,000 |  | 113,000 |
Tax credit carryforwards |  | 242,000 |  | 231,000 |
Other |  | 188,000 |  | 180,000 |
|  | 1,570,000 |  | 1,571,000 |
Valuation allowance |  | (135,000 | ) | (86,000 | )
Deferred tax assets |  | 1,435,000 |  | 1,485,000 |
Prepaid expenses |  | (323,000 | ) | (481,000 | )
Property and equipment |  | (569,000 | ) | (663,000 | )
Deferred tax liabilities |  | (892,000 | ) | (1,144,000 | )
Net deferred tax assets |  | $ | 543,000 |  | $ | 341,000 |
We established a valuation allowance because we determined that it was more likely than not that a portion of the net operating loss carryforwards and research and development credit would not be utilized. At December 31, 2016, the Company has established a valuation allowance of $135,000 against certain of its stated deferred tax assets to reduce the total to an amount which management believes to be appropriate realization of deferred tax asset is dependent upon sufficient future taxable income during the periods when deductible temporary differences and carryforwards are expected to be available to reduce taxable income. 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, 2016 and 2015:
Balance as of December 31, 2014 |  | $ | 56,000 |
Tax positions related to 2015: |  |  |
Additions based on tax positions related to the current year |  | 12,000 |
Additions based on tax positions related to the 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 |
Tax positions related to current year: |  |  |
Additions based on tax positions related to the current year |  | 15,000 |
Additions based on tax positions related to a prior year |  | 5,000 |
Reductions based on tax positions related to a prior year |  | (6,000 | )
Statute of limitations |  | (13,000 | )
Balance as of December 31, 2016 |  | $ | 52,000 |
The $52,000 of unrecognized tax benefits as of December 31, 2016 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, 2016 and 2015 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. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2016, with few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax year 2010.

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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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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