3 - Income Taxes

12 Months Ended

Dec. 31, 2015

Notes

3 - Income Taxes

3-Income Taxes-The provision for income tax expense consists of the following:

	2015	2014
Current:
Federal…………………………..	$  576,000	$  907,000
State………………………………	35,000	42,000
Deferred……………………………	233,000	6,000
	$  844,000	$  955,000

The following is a reconciliation of the statutory federal income tax rate to the actual effective tax rate:

	2015		2014
	Amount	%	Amount	%
Expected tax at U.S. statutory rate…………	$  861,000	34. 0	$     988,000	34.0
Permanent differences………………………	(40,000)	(1.6)	(61,000)	(2.1)
State taxes, net of federal benefit………….	23,000	0.9	28,000	1.0
Income tax expense…………………………	$  844,000	33.3	$    955,000	32.9

The Company’s effective tax rates were lower than the U.S. federal statutory rate in 2015 and 2014 primarily due to the Domestic Production Activities Deduction allowed under Internal Revenue Code Section 199.

The deferred tax liabilities and assets consist of the following:

	2015	2014
Depreciation and amortization………………………………..	$ (1,319,275)	$ (1,107,275)
Inventory………………………………………………………..	263,723	283,359
Accrued vacation………………………………………………	109,193	108,642
Allowance for doubtful accounts……………………………..	53,625	53,625
Other, net……………………………………………………….	(1,350)	565
	425,191	446,191
	$  (894,084)	$  (661,084)

Valuation allowances related to deferred taxes are recorded based on the “more likely than not” realization criteria.  The Company reviews the need for a valuation allowance on a quarterly basis for each of its tax jurisdictions.  A deferred tax valuation allowance was not required at December 31, 2015 or 2014.