Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Text Block]

Note

– Income Taxes

December

31,

2016,

the Company had approximately

$27,000

in capital loss carryforwards, and

$1,279,000

of federal research and development tax credits.

If not utilized, the investment tax credits expire from

2016

through

2030

and the research and development tax credits expire from

2031

2036.

Based on the available objective evidence, including the Company’s history of taxable income and the character of that income, management believes it is more likely than not that these components of the Company’s deferred tax assets will be fully utilized. The Company has provided for a partial valuation allowance against its total net deferred tax assets at

December

31,

2016

and

December

31,

2015

of approximately

$475,000

attributable to these components.

The expense/(benefit) for income taxes includes the following:

	2016			2015
Current:
Federal	$	(71,070	)	$	---
State		2,504			3,070
Total current tax provision		(68,566	)		3,070
Deferred:
Federal		(435,495	)		1,317,125
State		-			---
Total deferred tax provision		(435,495	)		1,317,125
Income tax (benefit)/expense	$	(504,061	)	$	1,320,195

March

2014,

New York State eliminated the state income tax for qualified manufacturing companies such as CVD.

The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:

	2016			2015

Allowance for doubtful accounts	$	771		$	6,345
Inventory capitalization		19,071			11,540
Depreciation and amortization		(211,014	)		(228,610	)
Investment tax credits		475,000			475,000
Research & development tax credits		1,278,690			1,134,168
Compensation costs		1,000,073			730,909
Vacation accrual		333,396			323,860
Accrued loss on legal settlement		--			--
Net operating loss carryforward		(7,280	)		--
Capital loss carryforward		26,627			26,627
Gross deferred tax asset		2,915,334			2,479,839
Less valuation allowance		(475,000	)		(475,000	)
Net deferred tax asset	$	2,440,334		$	2,004,839

Net current deferred tax asset		428,355			398,009
Net long-term deferred tax asset		2,011,979			1,606,830
Net deferred tax asset	$	2,440,334		$	2,004,839

The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:

	2016			2015

Expected provision at federal statutory tax rate (34%)	$	(222,083)		$	1,538,565
State taxes, net of federal benefit		2,504			3,070
Stock-based compensation expense		(269,163	)		(252,288	)

Net operating loss carryforward		(21,412	)		954,581
Federal research & development credit		(144,522	)		(437,303	)
Other permanent differences		150,615			(486,430	)
Income tax (benefit)/expense	$	(504,061	)	$	1,320,195