Note 8 - Income Taxes

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8. Income Taxes

The federal Tax Cut and Jobs Act of

2017

(the “Tax Reform Act”) was enacted

December 22, 2017.  

Effective

January 1, 2018,

the Tax Reform Act reduced statutory corporate income tax rates from

35%

to

21%

in addition to other tax changes including re-valuation of deferred tax assets and liabilities as of

December 31, 2017.  

For the

first

nine

months of

2018,

the Company realized an income tax expense of

$12,000,

which reflects the new federal corporate rate of

21%

versus the income tax benefit of

$322,000

or an effective rate of

35.1%,

for the

first

nine

months of

2017.

  The Company’s effective rate for

2018

relates to the higher year-to-date pre-tax income generated and the related impact of discrete events and non-deductible permanent items.  The

2017

tax benefit for the

first

nine

months was due to the year-to-date net loss. The income tax provision for the

2018

and

2017

periods differ from the expected benefit due to credits for research and development and other non-deductible items.

The Company’s federal net operating loss carryforward and research and development credit carryover as of

September 30, 2018

was

$141,000

and

$27,000,

respectively, and will begin to expire in

2037.

  The Company’s gross state net operating loss carryforwards and research and development credit carryover as of

September 30, 2018

was

$61,000

and

$115,000,

respectively and begin to expire in

2026.

 

The valuation allowance balance of

$91,000

at

September 30, 2018,

relates entirely to Minnesota research and development credit carryforwards that the Company does

not

expect to utilize and begin to expire in

2028.

 

It has been the Company’s policy to recognize interest and penalties related to uncertain tax positions in income tax expense.  As of

September 30, 2018

and

December 31, 2017,

there was

no

liability for unrecognized tax benefits.

The Company is subject to federal and state taxation. As of

September 30, 2018,

with few exceptions, the Company is

no

longer subject to examination prior to tax year

2014.