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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 10. Income Taxes Loss before income taxes for each of the two years in the period ended December 31, 2018 was subject to taxation under United States jurisdictions only. The provision for income taxes consists of the following (in thousands):
|  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (2 | ) |  | $ | (2 | )
State |  |  | 169 |  |  |  | 124 |
Total current income taxes |  |  | 167 |  |  |  | 122 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | - |
State |  |  | - |  |  |  | - |
Total deferred income taxes |  |  | - |  |  |  | - |
Total provision for income taxes |  | $ | 167 |  |  | $ | 122 |
On December 22, 2017, legislation commonly known as the Tax Act was signed into law. The Tax Act changes existing U.S. tax law and includes numerous provisions that will affect Avalon, including our income tax accounting, disclosure and tax compliance. The most impactful changes within the Tax Act are those that will reduce the U.S. corporate tax rates, business-related exclusions and deductions and credits. ASC 740, “Income Taxes ,” requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but for which they are able to determine a reasonable estimate, the company must record a provisional amount in the financial statements. Consequently, as of the date of enactment, and during the year ended December 31, 2018, Avalon valued all deferred tax assets and liabilities at the newly enacted Corporate U.S income tax rate. Avalon has a full valuation allowance on its federal deferred tax assets. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows (in thousands):
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accounts receivable, allowance for doubtful accounts |  | $ | 65 |  |  | $ | 60 |
Reserves not deductible until paid |  |  | 133 |  |  |  | 187 |
Net operating loss carryforwards |  |  |  |  |  |  |  |
Federal |  |  | 1,737 |  |  |  | 1,794 |
State |  |  | 704 |  |  |  | 556 |
Federal tax credit |  |  | 556 |  |  |  | 476 |
Other |  |  | 162 |  |  |  | - |
Gross deferred tax assets |  |  | 3,357 |  |  |  | 3,073 |
Less valuation allowance |  |  | (1,881 | ) |  |  | (1,313 | )
Deferred tax assets net of valuation allowance |  | $ | 1,476 |  |  | $ | 1,760 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  | $ | (1,438 | ) |  | $ | (1,582 | )
Other |  |  | (30 | ) |  |  | (170 | )
Gross deferred tax liabilities |  | $ | (1,468 | ) |  | $ | (1,752 | )
Net deferred tax asset |  | $ | 8 |  |  | $ | 8 |
The $1,468,000 of deferred tax liabilities will reverse in the same period and jurisdiction and is of the same character as the temporary differences giving rise to the $1,476,000 of deferred tax assets. Avalon has not provided a valuation allowance on the amount of deferred tax assets that it estimates will be utilized. If future taxable income is less than the amount that has been assumed in assessing the recoverability of the deferred tax assets, then an increase in the valuation allowance will be required, with a corresponding increase to income tax expense. Likewise, should Avalon ascertain in the future that it is more likely than not that deferred tax assets will be realized in excess of the net deferred tax assets, all or a portion of the $1,881,000 valuation allowance as of December 31, 2018, would be reversed as a benefit to the provision for income taxes in the period such determination was made. The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to loss before income taxes as a result of the following differences (in thousands):
|  | 2018 |  |  | 2017 |
Loss before income taxes |  | $ | (3,089 | ) |  | $ | (694 | )
Less net loss attributable to non-controlling interest in subsidiary |  |  | (2,112 | ) |  |  | (509 | )
Loss before income taxes attributable to |  |  |  |  |  |  |  |
Avalon Holdings Corporation common shareholders |  |  | (977 | ) |  |  | (185 | )
Federal statutory rate |  |  | 21 | % |  |  | 35 | %
Computed Federal provision (benefit) for income taxes |  |  | (205 | ) |  |  | (65 | )
State income taxes, net of federal income tax benefits |  |  | 135 |  |  |  | 81 |
Change in valuation allowance |  |  | 412 |  |  |  | (140 | )
Increase in available federal tax credit |  |  | (80 | ) |  |  | (78 | )
Other nondeductible expenses |  |  | 34 |  |  |  | 42 |
Decrease (increase) in net operating loss carryforward: |  |  |  |  |  |  |  |
State |  |  | (148 | ) |  |  | (19 | )
Federal |  |  | 4 |  |  |  | (4 | )
Deferred tax rate change |  |  | - |  |  |  | 262 |
Other, net |  |  | 15 |  |  |  | 43 |
Total provision for income taxes |  | $ | 167 |  |  | $ | 122 |
Avalon is subject to income taxes in the U.S. federal and various states jurisdictions. With few exceptions, Avalon is no longer subject to U.S. federal, state and local income tax examinations by taxing authorities for the years before 2014. Avalon recognizes any interest and penalty assessed by taxing authorities as a component of interest expense and other expense, respectively. There were no accruals for the payment of interest and penalties for 2018 and 2017. Avalon made net income tax payments of approximately $109,000 and $144,000 in 2018 and 2017, respectively. At December 31, 2018, Avalon has taxable loss carryforwards for federal income tax purposes aggregating approximately $8,230,000 which are available to offset future federal taxable income. These carryforwards expire in 2022 through 2038. In addition, at December 31, 2018, certain subsidiaries of Avalon have net operating loss carryforwards for state purposes of approximately $8,918,000 which are available to offset future state taxable income. These carryforwards expire at various dates through 2038. A valuation allowance has been provided because it is more likely than not that the deferred tax assets relating to certain of the federal and state loss carryforwards will not be realized.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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