Note 9 - Income Taxes

6 Months Ended

Jun. 30, 2015

NOTE 9: INCOME TAXES

The provision for income taxes includes the following:

	Six Months Ended June 30,
	2015		2014

Current:
Federal	$	645,116	$	----
State		12,173		----
Total Current Provision		657,289		----
Deferred:
Federal	$	26,920	$	(223,152	)
State		----		381,345
Total deferred		26,920		158,193
Income tax expense/(benefit)	$	684,209	$	158,193

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. Though this change led to the loss of benefits we had recorded for previous operating losses, it will reduce total income tax expense for future periods, as essentially all of our operations are in 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:

	Six Months Ended
	June 30,
	2015			2014
Income tax benefit at federal statutory rate [34%]	$	913,700		$	31,286
Change in capitalized inventory (Section 263A)					477
Change in vacation accrual		--			(10,392	)
Change in other accruals		23,175			(24,228	)
Difference between tax and book depreciation		(12,975	)		(24,091	)
Stock-based compensation		(28,120	)		(86,271	)
Research and development credits		(571,583	)		(109,933	)
Domestic production activities deduction		(83,411	)		--
Net operating loss carryforward		954,581			--
Tax carryback		(511,158	)		--
Impact of New York State taxation change		--			381,345
Income tax expense	$	684,209		$	158,193