Note 9 - Income Taxes

3 Months Ended

Mar. 31, 2015

NOTE 9: INCOME TAXES

The provision for income taxes includes the following:

	Three Months Ended March 31,
	2015		2014
Current:
Federal	$	309,122	$	-----
State		7,146		-----
Total Current Provision		316,268		-----
Deferred:
Federal	$	204,659	$	(161,965	)
State		----		381,345
Total deferred		204,659		219,380
Income tax expense	$	520,927	$	219,380

In March 2014, New York State eliminated the state income tax for qualified manufacturing companies such as CVD. Due to this change in tax law, the Company was required to write off state-level deferred tax assets which would have been used to offset future taxes payable to New York State.

Tax Rate Reconciliation

The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory rate is as follows:

	Three Months Ended
	March 31,
	2015			2014
Income tax benefit at federal statutory rate [34%]	$	404,311		$	(16,581	)
Change in capitalized inventory (Section 263A)		--			(11,080	)
Change in vacation accrual		--			(21,608	)
Change in other accruals		12,654			(4,674	)
Difference between tax and book depreciation		(16,298	)		7,532
Stock-based compensation		(9,689	)		(61,394	)
Domestic production activities deduction		(37,145	)		--
Research and development credits		(276,329	)		(54,160	)
Net operating loss		443,423			--
Impact of New York State taxation change		--			381,345
Income tax expense	$	520,927		$	219,380

- 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.

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