XML 65 R16.htm IDEA: XBRL DOCUMENT
v3.20.1

Note 8 - Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 8 - INCOME TAXES The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes, which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry-forwards. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. In accordance with prevailing accounting guidance, the Company is required to recognize and disclose any income tax uncertainties. The guidance provides a two -step approach to recognizing and measuring tax benefits and liabilities when realization of the tax position is uncertain. The first step is to determine whether the tax position meets the more-likely-than- not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Actual results could differ from these estimates. As of December 31, 2019, the Company had net operating loss carry-forward of approximately $19,258,541 for U.S. federal tax purposes expiring through 2037; approximately $8,228,823 for Danish tax purposes, which do not expire; approximately $464,022 for German tax purposes, which do not expire; and approximately $602,887 for Singapore tax purposes, which do not expire. As of December 31, 2019 and December 31, 2018, the Company established a valuation allowance of $3,845,000 and $3,428,000 for the tax components of LiqTech International Inc. and Liqtech NA, respectively; $1,209,000 and $1,846,000 for the tax components of LiqTech International AS and LiqTech Systems AS, respectively, $129,000 and $132,000 for the tax components of LiqTech Germany and $102,000 and $105,000 for the tax components of LiqTech Singapore as management could not determine that it was more than likely not that sufficient income could be generated by these components to realize the resulting net operating loss carry-forwards and other deferred tax assets of these components. The change in the valuation allowance for the year ended December 31, 2019 was $416,000, $( 637,000 ), $( 3,000 ) and $( 2,000 ) for the US, Danish, German and Singapore components. The change in the valuation allowance for the year ended December 31, 2018 was $460,000, $42,000, $( 7,000 ) and $( 5,000 ) for the US, Danish, German and Singapore components. The temporary differences, tax credits and carry forwards gave rise to the following deferred tax asset and liabilities at December 31, 2019 and December 31, 2018:
|  | 2019 |  |  | 2018 |
Vacation accrual |  | $ | 3,908 |  |  | $ | 3,814 |
Allowance for doubtful accounts |  |  | - |  |  |  | 734 |
Reserve for excess and obsolete inventory |  |  | 152,680 |  |  |  | 241,624 |
Business tax credit carryover |  |  | 30,935 |  |  |  | - |
Deferred compensation |  |  | 17,943 |  |  |  | 24,451 |
Net operating loss carryover |  |  | 5,889,088 |  |  |  | 5,184,992 |
Excess of book over tax depreciation |  |  | (300,805 | ) |  |  | (33,182 | )
Excess of book over tax work in progress |  |  | (847,290 | ) |  |  | - |
Valuation allowance |  |  | (5,285,222 | ) |  |  | (5,422,433 | )
|  | $ | (338,763 | ) |  | $ | - |
Distributed as: |  |  |  |  |  |  |  |
Long-term deferred tax asset |  |  | - |  |  |  | - |
Long-term deferred tax liability |  |  | (338,763 | ) |  |  | - |
|  | $ | (338,763 | ) |  | $ | - |
A reconciliation of income tax expense at the federal statutory rate to income tax expense at the Company’s effective rate is as follows for the years ended December 31, 2019 and 2018:
|  | 2019 |  |  | 2018 |
Computed tax at expected statutory rate |  | $ | (54,104 | ) |  | $ | (877,791 | )
State and local income taxes, net of federal benefit |  |  | (2,971 | ) |  |  | (9 | )
Non-US income taxed at different rates |  |  | 14,635 |  |  |  | (15,535 | )
Effect of change in corporate tax rate |  |  | - |  |  |  | 321,925 |
Deferred compensation |  |  | (6,508 | ) |  |  |  |
Non-deductible expenses |  |  | 4,794 |  |  |  | 14,580 |
Valuation allowance |  |  | (227,182 | ) |  |  | 193,584 |
Other |  |  | (25,916 | ) |  |  | (2,184 | )
Income tax expense (benefit) |  | $ | (297,252 | ) |  | $ | (365,430 | )
The components of income tax expense (benefit) from continuing operations for the years ended December 31, 2019 and 2018 consisted of the following:
|  | 2019 |  |  | 2018 |
Current income taxes: |  |  |  |  |  |  |  |
Danish |  | $ | (311,189 | ) |  | $ | (365,430 | )
Federal |  |  | - |  |  |  | - |
State |  |  | - |  |  |  | - |
Current tax (benefit) |  | $ | (311,189 | ) |  | $ | (365,430 | )
Deferred income taxes: |  |  |  |  |  |  |  |
Book in excess of tax depreciation |  | $ | (61,808 | ) |  | $ | (40,231 | )
Allowance for doubful accounts |  |  | 752 |  |  |  | - |
Work in progress |  |  | 848,000 |  |  |  | - |
Net operating loss carryover |  |  | (344,870 | ) |  |  | (729,928 | )
Valuation allowance |  |  | (507,935 | ) |  |  | 704,876 |
Deferred compensation |  |  | (6,508 | ) |  |  | 13,127 |
Accrued vacation |  |  | (2 | ) |  |  | (949 | )
Reserve for obsolete inventory |  |  | 86,308 |  |  |  | 53,105 |
Deferred tax expense (benefit) |  | $ | 13,937 |  |  | $ | - |
Total tax expense (benefit) |  | $ | (297,252 | ) |  | $ | (365,430 | )
Deferred income tax expense / (benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income. The Company files Danish, U.S. federal and Minnesota state income tax returns. LiqTech International AS and LiqTech Systems AS are generally no longer subject to tax examinations for years prior to 2014 for their Danish tax returns. LiqTech NA is generally no longer subject to tax examinations for years prior to 2014 for U.S. federal and state tax returns.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration