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Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
11.
   Income Taxes
 
Tax Reform act of
2017
 
On
December 22, 2017,
the Tax Cuts and Jobs Act was enacted into law and introduced significant changes to U.S. tax law.  The Company reflected the impacts of changes in tax law to the financial statements including the federal income tax rate reduction from
35%
to
21%;
the new limitations on the tax deductibility of interest expense; the acceleration of business asset expensing; the repeal of the alternative minimum tax ("AMT"); the limitation on the use of net operating losses generated in future years; and the Global Intangible Low Taxed Income regime.
 
Subsequent Events
 
On
March 27, 2020,
the CARES Act was enacted into law and introduced changes to U.S. tax law including revised limitations on the tax deductibility of interest expense and the limitation on the use of net operating losses.  The Company is reviewing the implications of these statutes to its
2020
financial statements. 
 
Due to an ownership change in the
first
quarter of
2020,
the future utilization of certain post-change income tax attributes of Yunghong CTI Ltd , including net operating loss carryovers, are anticipated to be limited for U.S. income tax purposes.
 
F-
17
Table of Contents
 
The provision (benefit) for income taxes consists of the following:
 
   
Year Ended December 31,
  
   
2019
    
2018
  
Current:
  
 
 
 
  
 
 
 
Federal
   $
(845
 )   $
165,000
  
State
    
-
      
-
  
Foreign
    
11,264
      
(245,040
 )
Total Current
    
10,420
      
(80,040
 )
                 
Deferred:
  
 
 
 
  
 
 
 
Federal
    
71,007
     $
317,640
  
State
    
32,659
      
266,413
  
Foreign
    
31,517
      
432,693
  
Total Deferred
    
135,183
      
1,016,746
  
Provision (Benefit) for income taxes
  
 
145,602
   
 
936,706
  
 
Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of
21%
to pretax loss as follows (in thousands):
 
   
Year Ended December 31,
  
 
  
2019
    
2018
  
U.S. Federal provision (benefit)
            
At Statutory Rate
   $
(1,503,581
 )   $
(589,875
 )
State Taxes
    
(412,909
 )    
(298,917
 )
Change in Valuation Allowance
    
2,473,248
      
1,777,768
  
Nondeductible Expenses
    
216,790
      
3,859
  
Foreign Taxes
    
(48,304
 )    
45,552
  
Deconsolidation & Impairment
    
(373,448
 )    
 
  
Other
    
(206,193
 )    
(1,681)
  
Rounding
    
(1
 )    
 
  
Total
  
$
145,602
   
$
936,706
  
 
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18
Table of Contents
 
Deferred Tax Assets and Liabilities
 
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets for federal and state income taxes are as follows):
 
   
Year Ended December 31,
  
   
2019
    
2018
  
Deferred Tax Assets:
  
 
 
 
  
 
 
 
Federal & State NOL Carryforward
    
531,864
      
805,865
  
Foreign Tax Credit & Other Credits
    
463,451
      
469,408
  
Reserves and Accruals
    
320,961
      
320,783
  
Unicap 263A Adjustment
    
76,294
      
112,199
  
Other DTA
    
65,215
      
88,369
  
Foreign NOL Carryforward
    
802,907
      
566,765
  
Deferred Interest Expense
    
1,030,634
      
529,983
  
Deconsolidation & Impairment
    
1,028,249
      
-
  
Total Gross DTA
    
4,319,575
      
2,893,372
  
Less: Val. Allowance
   
(4,315,957
 )    
(2,409,474
 )
Total Deferred Tax Assets
    
3,618
      
483,898
  
                 
Deferred Tax Liabilities:
  
 
 
 
  
 
 
 
Fixed Assets & Intangibles
    
(3,618
 )    
(257,113
 )
Deferred State Income Tax
    
-
      
(91,691
 )
Total Gross DTL
    
(3,618
 )    
(348,804
 )
Net Deferred Tax Assets
  
 
00
    
 
135,094
 
 
Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Due to the lack of earnings history, a valuation allowance has been recorded to reduce the deferred tax assets to its net realizable value. The valuation allowance increased by
$2.5
million and increased by
$1.8
million during the years ended
December 31, 2019
and
December 31, 2018,
respectively.
 
Net Operating Loss and Tax Credit Carryforwards
 
As of
December 31, 2019,
we had a net operating loss carryforward for federal income tax purposes of approximately
$2.7
million, which will begin to expire in
2024.
We had a total state net operating loss carryforward of approximately $
6.3
million, which will begin to expire in
2020.
Approximately
$2.0
million expired in
2019.
We have foreign net operating loss carryforwards of approximately
$2.7
million.