Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

The Company accounts for its deferred tax assets and liabilities, including excess tax benefits of share-based payments, based on the tax ordering of deductions to be used on its tax returns. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities for the years ended December 31 is as follows:

	2020		2019
Deferred tax assets:
Net operating loss carry forwards	$	324,000	$	762,000
Tax Credits		907,000		286,000
Deferred revenue		152,000		58,000
Non-qualified stock option expense		120,000		136,000
Investment in TEC		89,000		51,000
Reserves, accruals and other		254,000		231,000
Accumulated depreciation and amortization		46,000		268,000
Total deferred tax assets		1,892,000		1,792,000
Less: Valuation allowance		-		-
Net deferred tax asset	$	1,892,000	$	1,792,000

Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three-year period. Such limitation of the net operating losses has not occurred. The Company believes it has approximately $1.1 million of federal net operating loss carry-forwards as of December 31, 2020, that are available to offset future taxable income that expire starting in 2031, and approximately $474,000 which can be carried forward indefinitely.    

Significant components of the (provision) for income tax for the years ended December 31 as follows:

	2020			2019
Current	$	(119,000	)	$	(162,000	)
Deferred		(100,000	)		608,000
Change in valuation allowance		-			-
Provision for income taxes	$	(219,000	)	$	446,000

The Company is subject to federal and state taxes. Reconciliations of the Company’s effective income tax rate to the federal statutory rate for the years ended December 31 are as follows:    

	2020						2019
	$			%			$		%
Federal income tax expense at the statutory rate	$	265,000			21.0	%	$	78,000		21.0	%
State income taxes, net of federal benefit		69,000			5.5	%		20,000		5.4	%
Permanent differences		186,654			14.8	%		79,665		21.4	%
True ups to tax return and other		(739,654	)		-58.7	%		268,335		72.2	%
Change in federal income tax rates		-			0.0	%		-		0.0	%
Change in valuation allowance		-			0.0	%		-		0.0	%
Provision (benefit) for income taxes	$	(219,000	)		-59.0	%	$	446,000		120.1	%

The benefit for income taxes increased in 2020 from a true-up of the deferred tax asset and temporary timing differences in deferred revenue, reserves, depreciation and amortization, and net operating loss carryforward, offset by an adjustment for taxes prepaid and refunded from prior year tax over payments.