Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12. INCOME TAXES 

Income tax expense for 2023 was $3,869,355 which was comprised of $4,817,023 of current income tax expense and $947,668 of deferred income tax benefit, resulting in an effective tax rate of 22.5%. Income tax expense for 2022 was $1,170,791 which was comprised of $2,629,560 of current income tax expense and $1,458,769 of deferred income tax benefit, resulting in an effective tax rate of 15.1%.

A reconciliation of the provision of income taxes to the statutory federal income tax rate is as follows:

	Year			Year
	December 31,			December 31,
	2023			2022
Income Before Provision for Income Taxes	$	17,164,148		$	7,732,194
Statutory rate		21	%		21	%
Tax at statutory rate		3,604,471			1,623,761
State taxes, net of federal benefit		302,484			20,438
Release of FIN 48 reserve		(121,000	)		(414,000	)
Deferred Adjustments		125,935			-
Permanent differences		(299,103	)		(17,334	)
Return to provision adjustments		262,552			(22,681	)
Other		(5,984	)		(19,393	)
Provision for income taxes	$	3,869,355		$	1,170,791

Deferred tax assets (liabilities) consist of the following: 

	December 31,			December 31,
	2023			2022
Inventories	$	176,022		$	221,441
Bad debts		23,197			5,757
Accrued liabilities		527,320			677,728
Prepaid expense		(103,037	)		(136,419	)
Depreciation and amortization		(2,464,503	)		(3,111,224	)
Capitalized Costs		496,897			629,085
Research and development and other credit carryforwards		1,067,816			443,689
Right of use lease accounting		(149,876	)		(80,376	)
Directors stock option plan		203,914			180,761
Total deferred tax liability		(222,250	)		(1,169,558	)
Valuation allowance		(33,000	)		(39,000	)
Reserve for uncertain tax positions		(55,000	)		(176,000	)
Total reserves & allowances		(88,000	)		(215,000	)
Net deferred tax liability, net of reserves	$	(310,250	)	$	(1,384,558	)

Valuation Allowance
The Company has a valuation allowance for deferred tax assets based upon certain credits that may not be fully utilized in the future. The Company believes the valuation allowance of $33,000 at December 31, 2023 and $39,000 at December 31, 2022, is adequate.

Reserve for Uncertain Tax Positions
The Company has a reserve of unrecognized tax benefits related to exposures in accordance with ASC 740. The Company believes the reserve of $55,000 at December 31, 2023 and $176,000 at December 31, 2022, is adequate. Due to the uncertainties involved with this significant estimate, it is reasonably possible that the Company’s estimate may change in the near term. 

Tax Credits and Net Operating losses:

At December 31, 2023, the Company has state net operating losses (NOLs) and research and development (R&D) and other credit carryforwards for tax purposes which expire as follows: 

Tax Year			R& D & Other
Expires	State NOLs		Credits
2024	$	-	$	3,000
2025		-		3,000
2026		-		3,000
2027		-		3,000
2028		-		3,000
2029		-		3,000
2030		-		3,000
2031		-		3,000
2032		-		3,000
2033		-		3,000
2034		-		3,000
2035		-		-
2036		-		-
2037		-		-
2038 and beyond		-		-
	$	-	$	33,000