Note 9 - Income Taxes

3 Months Ended

Mar. 31, 2018

NOTE

INCOME TAXES

December 22, 2017,

the Tax Cuts and Jobs Act was enacted in the U.S. Tax Reform significantly lowering the amount of current and future income tax expense primarily due to the reduction in the U.S. statutory tax rate from

35.0%

21.0%.

This provision went into effect on

January 1, 2018

and will result in the loss of our ability to take the domestic production activities deduction which has been repealed and will require us to remeasure our deferred tax assets and liabilities. This has resulted in a higher tax rate at this time than the statutory rate.

The provision for income taxes includes the following:

	Three Months Ended March 31,
	2018			2017
Current:
Federal	$	240,924		$	383,178
State		9,000			9,780
Total current provision		249,924			392,958
Deferred:
Federal	$	(2,154	)	$	291,174
State		----			----
Total deferred (benefit)/provision		(2,154	)		291,174
Income tax expense	$	247,770		$	684,132

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,
	2018			2017
Income tax expense at federal statutory rate [21%-2018; 34%-2017]	$	173,587	*	$	717,600
State taxes		9,000			6,455
Change in other accruals		(75	)		5,639
Difference between tax and book depreciation		33,037			54,390
FAS 123R employee compensation		44,860			(36,032	)
Domestic production activities deduction		---			(50,320	)
Net operating loss		---			(13,600	)
Federal research and development credit		(12,639	)		---
Income tax expense/(benefit)	$	247,770		$	684,132

*The Company’s foreign entity, CVD Tantaline ApS, has incurred losses since its inception in

December 2016,

which would have provided a deferred tax asset at

March 31, 2018,

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.