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Note 9 - Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 9 – Income Taxes At December 31, 2020, the Company had approximately $1,719,598 of federal research and development tax credits. If not utilized, the research and development tax credits expire from 2028 - 2040. For the year ended December 31, 2020 and 2019, the Company has provided a full valuation allowance against all of the net deferred tax assets in the amount of $3,381,133 and $2,497,414, respectively. This was based on management's assessment, including the last two years of operating losses, that it is more likely than not that the net deferred tax assets may not be realized in the future. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted by the United States Congress. As a result of the enactment of the CARES Act, net operating losses (“NOL's”) generated in 2018 - 2020 can now be carried back for five years and resulted in the Company recognizing approximately $1.5 million of a tax benefit, of which $.7 million is a receivable at December 31, 2020. We continue to evaluate for potential utilization of the Company's deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections and timing of orders, the commencement of operations of the CVD Materials segment and cost containment measures. The expense/(benefit) for income taxes includes the following:
|  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (1,528,305 | ) |  | $ | - |
State |  |  | 950 |  |  |  | (11,506 | )
Total current tax provision |  |  | (1,527,355 | ) |  |  | (11,506 | )
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | 1,425,414 |
State |  |  | --- |  |  |  | --- |
Total deferred tax provision |  |  | - |  |  |  | 1,425,414 |
Income tax expense / (benefit) |  | $ | (1,527,355 | ) |  | $ | 1,413,908 |
The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:
|  | 2020 |  |  | 2019 |
Deferred income tax assets: |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 35,442 |  |  | $ | 5,293 |
Inventory capitalization |  |  | 6,969 |  |  |  | 7,107 |
Impairment Charge |  |  | 712,683 |  |  |  | - |
Research & development tax credits |  |  | 1,719,598 |  |  |  | 588,096 |
Compensation costs |  |  | 211,363 |  |  |  | 202,287 |
Vacation accrual |  |  | 89,626 |  |  |  | 142,230 |
Interest expense carryforward |  |  | 223,768 |  |  |  | 144,340 |
Net operating loss carryforward |  |  | 925,912 |  |  |  | 1,798,315 |
Other items |  |  | 12,248 |  |  |  | 52,232 |
Total deferred tax asset |  |  | 3,937,609 |  |  |  | 2,939,900 |
Deferred incomes tax liability: |  |  |  |  |  |  |  |
Property and equipment - tax over book depreciation |  |  | (556,476 | ) |  |  | (442,486 | )
Less valuation allowance |  |  | (3,381,133 | ) |  |  | (2,497,414 |
Net long-term deferred tax asset |  | $ | - |  |  | $ | - |
The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:
|  | 2020 |  |  | 2019 |
Expected provision at federal statutory tax rate (21%) |  | $ | (1,596,485 | ) |  | $ | (1,031,888 | )
Provision for valuation allowance |  |  | 883,796 |  |  |  | 2,497,414 |
Foreign tax loss |  |  | 70,492 |  |  |  | 57,856 |
Net operating loss carryback |  |  | (1,527,355 | ) |  |  | - |
State taxes, net of federal benefit |  |  | (36,832 | ) |  |  | (11,506 | )
Federal research & development credit |  |  | (64,266 | ) |  |  | (174,416 | )
Other permanent differences |  |  | 743,295 |  |  |  | 76,448 |
Income (benefit) / tax expense |  | $ | (1,527,355 | ) |  | $ | 1,413,908 |
The Company's foreign subsidiary, CVD Tantaline ApS incurred a loss of approximately $336,000, which would provide a $74,000 deferred tax asset as of December 31, 2020, based on the standard corporate tax rate of 22% in Denmark. For the year ended December 31, 2019 the Company had a loss of $276,000 which would provide a $61,000 deferred tax asset. However, sufficient uncertainty exists as to the realizability of these assets such that a full valuation allowance has been necessary.

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