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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 1 0 – Income Taxes The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act provides for numerous significant tax law changes and modifications including the reduction of the U.S. federal corporate income tax rate from 35% to 21. In accordance with the accounting standard ASC 740 “Income Taxes”, companies are required to recognize the tax law changes in the period of enactment. As a result of the reduction of the corporate income tax rate to 21%, U.S. GAAP requires companies to remeasure their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the period of enactment. The Company remeasured deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The provisional amount recorded for the remeasurement and resulting write-down of the deferred tax balance was $689,000. At December 31, 2017, the Company had approximately $427,000 of federal research and development tax credits. If not utilized, the research and development tax credits expire from 2032 - 2037. 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 expense/(benefit) for income taxes includes the following:
|  | 201 7 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | 1,091,216 |  |  | $ | (71,070 | )
State |  |  | 11,580 |  |  |  | 2,504 |
Total current tax provision |  |  | 1,102,796 |  |  |  | (68,566 | )
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 831,148 |  |  |  | (435,495 | )
State |  |  | - |  |  |  | --- |
Total deferred tax provision |  |  | 831,148 |  |  |  | (435,495 | )
Income tax (benefit)/expense |  | $ | 1,933,944 |  |  | $ | (504,061 | )
In 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:
|  | 201 7 |  |  | 201 6 |
Allowance for doubtful accounts |  | $ | 773 |  |  | $ | 771 |
Inventory capitalization |  |  | 6,813 |  |  |  | 19,071 |
Depreciation and amortization |  |  | 70,272 |  |  |  | (211,014 | )
Investment tax credits |  |  | ---- |  |  |  | 475,000 |
Research & development tax credits |  |  | 496,930 |  |  |  | 1,278,690 |
Compensation costs |  |  | 838,643 |  |  |  | 1,000,073 |
Vacation accrual |  |  | 179,309 |  |  |  | 333,396 |
Net operating loss carryforward |  |  | --- |  |  |  | (7,280 | )
Capital loss carryforward |  |  | 16,446 |  |  |  | 26,627 |
Net long-term deferred tax asset |  |  | 1,609,186 |  |  |  | 2,915,334 |
Less valuation allowance |  |  | --- |  |  |  | (475,000 | )
Net long-term deferred tax asset |  | $ | 1,609,186 |  |  | $ | 2,440,334 |
The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:
|  | 2017 |  |  | 2016 |
Expected provision at federal statutory tax rate (34%) |  | $ | 2,740,010 |  |  | $ | (222,083 | )
State taxes, net of federal benefit |  |  | 11,580 |  |  |  | 2,504 |
Stock-based compensation expense |  |  | (161,429 | ) |  |  | (269,163 | )
Net operating loss carryforward |  |  | 7,280 |  |  |  | (21,412 | )
Federal research & development credit |  |  | (781,760 | ) |  |  | (144,522 | )
Other permanent differences |  |  | 118,263 |  |  |  | 150,615 |
Income tax expense/(benefit) |  | $ | 1,933,944 |  |  | $ | (504,061 | )
The Company ’s foreign entity CVD Tantaline ApS incurred a loss of approximately $865,000, which would provide a $190,000 deferred tax asset as of December 31, 2017, based on the standard corporate tax rate of 22% in Denmark. However, sufficient uncertainty exists as to the realizability of these assets such that a full valuation allowance is necessary. There was no significant loss for the year ended December 31, 2016.

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- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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