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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | 10. Income Taxes For each of the years 2017 and 2016, current tax provisions and current deferred tax provisions were recorded as follows:
|  | 2017 |  |  | 2016 |
Current Tax Provision |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |
State |  |  | (27,000 | ) |  |  | (25,000 | )
Foreign |  |  | (5,000 | ) |  |  | (1,000 | )
|  |  | (32,000 | ) |  |  | (26,000 | )
Deferred Tax Provision |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | - |
State |  |  | (24,000 | ) |  |  | (4,000 | )
Foreign |  |  | (10,000 | ) |  |  | (8,000 | )
|  |  | (34,000 | ) |  |  | (12,000 | )
Total Tax Provison |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | - |
State |  |  | (51,000 | ) |  |  | (29,000 | )
Foreign |  |  | (15,000 | ) |  |  | (9,000 | )
|  | $ | (66,000 | ) |  | $ | (38,000 | )
The net deferred tax assets and liabilities have been reported in other liabilities in the consolidated balance sheets at December 31, 2017 and 2016 as follows:
|  | 2017 |  |  | 2016 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
NOL carryforwards |  | $ | 15,337,000 |  |  | $ | 23,291,000 |
UK NOL carryforwards |  |  | 567,000 |  |  |  | 516,000 |
Allowance for doubtful accounts |  |  | 119,000 |  |  |  | 139,000 |
Compensation and vacation accrual |  |  | 64,000 |  |  |  | 92,000 |
Operating accruals |  |  | 47,000 |  |  |  | 147,000 |
Research and experimentation, AMT and foreign tax credits |  |  | 148,000 |  |  |  | 147,000 |
Texas Margin Tax Credit |  |  | 136,000 |  |  |  | 126,000 |
Fixed assets and intangibles |  |  | (220,000 | ) |  |  | 199,000 |
Other |  |  | 514,000 |  |  |  | 664,000 |
Total gross deferred tax assets |  |  | 16,712,000 |  |  |  | 25,321,000 |
Valuation allowance |  |  | (16,340,000 | ) |  |  | (24,880,000 | )
Net deferred tax assets |  |  | 372,000 |  |  |  | 441,000 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Capitalized software |  |  | 375,000 |  |  |  | 359,000 |
Foreign |  |  | 49,000 |  |  |  | 45,000 |
Deferred revenue |  |  | - |  |  |  | 49,000 |
Total gross deferred liabilities |  |  | 424,000 |  |  |  | 453,000 |
Net deferred taxes |  | $ | (52,000 | ) |  | $ | (12,000 | )
The reconciliation of computed expected income taxes to effective income taxes by applying the federal statutory rate of 34% is as follows:
|  | For the year ended December 31, |
|  | 2017 |  |  | 2016 |
Tax at federal income tax rate |  | $ | 316,000 |  |  | $ | 962,000 |
State provision |  |  | (51,000 | ) |  |  | (29,000 | )
Foreign tax differential |  |  | 3,000 |  |  |  | 2,000 |
Change in valuation allowance |  |  | 8,898,000 |  |  |  | (917,000 | )
Impact related to tax reform |  |  | (8,791,000 | ) |  |  | - |
Permanent items |  |  | (441,000 | ) |  |  | (56,000 | )
Total Provision |  | $ | (66,000 | ) |  | $ | (38,000 | )
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant change in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liability at the enacted rate. This revaluation resulted in an expense of $8,791,000 recorded in continuing operations and a corresponding reduction in the valuation allowance. The new legislation will require the Company to pay tax on the unremitted earnings of its foreign subsidiaries though December 31, 2017. Because of the complexities involved in determining the previously unremitted earnings and profits of all our foreign subsidiaries, the Company is still in the process of obtaining, preparing, and analyzing the required information and recorded an initial estimate of the impact in our Consolidated Financial Statements. The net change in the total valuation allowance for the year ended December 31, 2017 was a decrease of $8,898,000. The net change in the total valuation allowance for the year ended December 31, 2016 was an increase of $917,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and planning strategies in making this assessment. Based on the level of historical operating results and projections for the taxable income for the future, management has determined that it is more likely than not that the portion of deferred taxes not utilized through the reversal of deferred tax liabilities will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. At December 31, 2017, the Company has available net operating loss (“NOL”) carryforwards of approximately $66,554,000 for federal income tax purposes, which will begin to expire in 2018. The NOL carryforwards for state purposes, which will continue expiring in 2018, are approximately $29,185,000. There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards due to continued operating losses. Further, the Company had a Section 382 analysis performed to determine the impact of any changes in ownership. Based on this analysis, no ownership change has occurred that would limit the use of the NOLs. Under Internal Revenue Code (IRC) Section 382 and similar state provisions, ownership changes may limit the annual utilization of NOL carryforwards existing prior to a change in control that are available to offset future taxable income. Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards. The Company continues to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified. The Company has also established a full valuation allowance for substantially all deferred tax assets, including the NOL carryforwards, since the Company could not conclude that it was more likely than not able to generate future taxable income to realize these assets. In addition, the Company has approximately $171,000 of state tax credit tax carryforwards that expire in the years 2018 through 2026. The deferred tax assets as of December 31, 2017 include a deferred tax asset of $437,000 representing NOLs arising from the exercise of stock options by Company employees for 2005 and prior years. To the extent the Company realizes any tax benefit for the NOLs attributable to the stock option exercises, such amount would be credited directly to stockholders’ equity. United States income taxes were not provided on unremitted earnings from non-United States subsidiaries. Such unremitted earnings are considered to be indefinitely reinvested and determination of the amount of taxes that might be paid on these undistributed earnings is not practicable. The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to 2013. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

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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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