Note 9 - Income Taxes

9 Months Ended

Sep. 30, 2015

NOTE 9: INCOME TAXES

The provision for income taxes includes the following:

	Nine Months Ended September 30,
	2015			2014

Current:
Federal	$	1,043,650		$	281,748
State		15,859			25,572
Total Current Provision		1,059,509			307,320
Deferred:
Federal	$	(331,750	)	$	(191,472	)
State		----			381,345
Total deferred		(331,750	)		189,873
Income tax expense/(benefit)	$	727,759		$	497,193

In March 2014, New York State eliminated the state income tax for qualified manufacturing companies such as CVD. Due to this change in the 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:

	Nine Months Ended
	September 30,
	2015			2014
Income tax benefit at federal statutory rate [34%]	$	1,204,274		$	438,244
Change in capitalized inventory (Section 263A)		--			3,159
Change in other accruals		32,217			(27,936	)
Difference between tax and book depreciation		(24,312	)		(91,385	)
Stock-based compensation		(39,234	)		(97,041	)
Research and development credits		(973,649	)		(109,193	)
Domestic production activities deduction		(109.989	)		--
Net operating loss carryforward		954,581			--
Tax carryback		(511,158	)		--
Provision to 2014 tax return true up		195,029			--
Impact of New York State taxation change		--			381,345
Income tax expense	$	727,759		$	497,193