11.	Income Taxes

The items comprising the Company’s income tax provision are as follows:

	For the Years Ended December 31,
	2018			2017
Current tax provision:
Federal	$	-		$	-
State		3,200			800
Foreign		414,000			329,500
Current tax provision		417,200			330,300
Deferred tax (benefit)/provision:
Federal		(1,270,400	)		1,159,700
State		(26,100	)		35,100
Foreign		(93,500	)		(111,300	)
Net legislative change in corporate tax rate		-			(5,380,300	)
Deferred tax benefit		(1,390,000	)		(4,296,800	)
Total income tax benefit	$	(927,800	)	$	(3,966,500	)

Total income tax (benefit)/expense differs from the amount that would be provided by applying the statutory federal income tax rate to pretax earnings as illustrated below:

	For the Years Ended December 31,
	2018			2017

Income tax provision at statutory federal income tax rate	$	(1,901,400	)	$	1,167,100
State tax (benefit)/provision, net of federal benefit		(44,500	)		33,100
Non-deductible Merger expenses		647,200			213,500
Non-deductible mangement and acquisition fees		325,900			-
Net legislative change in corporate tax rate		-			(5,380,200	)
Total income tax benefit	$	(927,800	)	$	(3,966,500	)

Temporary differences and carry-forwards that give rise to a significant portion of deferred tax assets and liabilities as of December 31, 2018 and 2017 were as follows:

	December 31,
	2018			2017
Deferred tax assets:
Current and prior year tax losses	$	4,065,100		$	3,362,100
Maintenance reserves		3,100,800		$	2,810,200
Foreign tax credit		611,900			295,800
Deferred interest expense		81,800			-
Deferred maintenance, bad debt allowance and other		92,500			38,800
Alternative minimum tax credit		45,500			45,500
Deferred tax assets		7,997,600			6,552,400
Deferred tax liabilities:
Accumulated depreciation on aircraft and aircraft engines		(14,773,800	)		(14,591,000	)
Deferred income		(320,600	)		(495,100	)
Leasehold interest		(185,400	)		-
Net deferred tax liabilities	$	(7,282,200	)	$	(8,533,700	)

Consolidated deferred federal income taxes arise from temporary differences between the valuation of assets and liabilities as determined for financial reporting purposes and federal income tax purposes and are measured at enacted tax rates. On December 22, 2017, the Tax Act was signed into law. Among other things, the Tax Act reduced the Company’s corporate federal tax rate to a flat 21% for years after 2017. As a result, the Company’s deferred tax items are measured at an effective federal tax rate of 21% as of December 31, 2018 and December 31, 2017. Although realization is not assured, management believes it is more likely than not that the entire deferred federal income tax asset will be realized. The amount of the deferred federal income tax assets considered realizable could be reduced in the near term if estimates of future taxable income are reduced.

Beginning in 2018, the Tax Act also imposes a new provision designed to tax global intangible low-taxed income ("GILTI"), which requires the inclusion, in the Company's U.S. income tax return, of foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Per guidance issued by the FASB, companies can either account for deferred taxes related to GILTI or treat tax arising from GILTI as a period cost. Both are acceptable methods subject to an accounting policy election. On December 31, 2018, the Company finalized its policy and has elected to use the period cost method for GILTI. In 2018, the Company did not account for any GILTI inclusion as its Canadian subsidiary was not material.

The federal operating loss carryovers totaled approximately $19 million, of which $16 million will be available to offset 100% of annual taxable income in future years and may be carried over through 2035 and $3 million will be available to offset 80% of annual taxable income in future years and may be carried forward indefinitely. The current year state operating loss carryovers of approximately $327,000 will be available to offset taxable income in the two preceding years and in future years through 2038. The Company expects to utilize the net operating loss carryovers remaining at December 31, 2018 in future years.

During the year ended December 31, 2018, the Company had pre-tax loss from domestic sources of approximately $6.0 million and pre-tax loss from foreign sources of approximately $3.1 million. The Company had pre-tax income from domestic sources of approximately $2.2 million and pre-tax income from foreign sources of approximately $1.2 million for the year ended December 31, 2017. The foreign tax credit carryover will be available to offset federal tax expense in future years through 2028.

The Tax Act repealed the corporate alternative minimum tax for tax years beginning after 2017. In addition, beginning in 2018, the Company’s alternative minimum tax credit (“MTC”) will be available to offset federal tax expense and is refundable in an amount equal to 50% of the excess MTC for the tax year over the amount of the credit allowable for the year against regular tax liability. In 2021, any remaining MTC will be fully refundable.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2014. At December 31, 2018, the Company had a balance of accrued tax, penalties and interest in accounts payable and taxes payable totaling $85,400 related to unrecognized tax benefits on its non-U.S. operations. The Company does not anticipate any significant changes to the unrecognized tax benefits within twelve months of this reporting date. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	December 31,
	2018		2017
Balance at January 1	$	-		-
Additions for prior years’ tax positions		85,400		-
Balance at December 31	$	85,400		-

The Company accounts for interest related to uncertain tax positions as interest expense, and for income tax penalties as tax expense.