8. INCOME TAXES

Significant components of our deferred tax assets and liabilities as of September 30 are as follows:


	2019		2018
Deferred tax assets:
Inventory	$	102	$	101
Accrued compensation and vacation		162		68
Accrued expenses and other		379		277
Domestic net operating loss carryforwards		3,282		3,328
Basic difference for intangible assets		254		114
Stock compensation expense		2		5
AMT credit carryover		31		62
Total deferred tax assets		4,212		3,955

Deferred tax liabilities:
Prepaid expenses		(121)		(60)
Basis difference for fixed assets		(219)		(280)
Total deferred tax liabilities		(340)		(340)

Total net deferred tax assets		3,872		3,615

Valuation allowance for net deferred tax assets		(3,841)		(3,553)

Net deferred tax asset	$	31	$	62

Significant components of the provision (benefit) for income taxes are as follows as of the year ended September 30:


	2019		2018
Current:
Federal	$	(31)	$	(6)
State and local		4		16
Deferred:
Federal		31		(70)
State and local		—		—
Income tax expense (benefit)	$	4	$	(60)

The effective income tax rate on continuing operations varied from the statutory federal income tax rate as follows:


	2019		2018
Federal statutory income tax rate	21.0	%	21.0	%
Increases (decreases):
State and local income taxes, net of Federal tax benefit, if applicable	(0.4)	%	(5.0)	%
Other nondeductible expenses	(11.5)	%	(13.6)	%
Valuation allowance changes	(9.6)	%	21.1	%
Effective income tax rate	(0.5)	%	23.5	%

On December 22, 2017, the United States (“U.S.”) enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”). The Tax Act included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%.

Accordingly, the Company’s income tax provision as of September 30, 2019 reflects the current year impacts of the U.S. Tax Act on the estimated annual effective tax rate. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%. The impact from the permanent reduction to the U.S. federal corporate income tax rate from 35% to 21% is effective January 1, 2018 (the “Effective Date”). When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year of enactment and as a result the Company calculated a U.S. federal statutory income tax rate of 24.5% for the current fiscal year end September 30, 2018. However, we have adjusted the statutory income tax rate to 21% as this is the rate when the deferred balances are expected to reverse.

The difference between the newly enacted federal statutory rate of 21.0% and our effective rate of (0.5%) is due to changes in our valuation allowance on our net deferred tax assets along with realizing the deferred tax asset associated with the AMT credit carryforward and becoming a current benefit. On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. In the prior year, the additional provisional amount of $1,718 was recognized due to the enactment of the Tax Act with an offsetting decrease to the valuation allowance. We have completed our assessment of these originally provisional entries and believe that all adjustments relating the enactment of the Tax Act are now finalized.

Realization of deferred tax assets associated with the net operating loss carryforward and credit carryforward is dependent upon generating sufficient taxable income prior to their expiration. The valuation allowance in fiscal 2019 and 2018 was $3,841 and $3,553, respectively for our domestic operations. Payments made in fiscal 2019 and 2018 for income taxes amounted to $7 and $5, respectively.

At September 30, 2019, we had domestic net operating loss carryforwards of approximately $11,546 for federal and $18,534 for state, which expire from September 30, 2023 through 2033.

We may recognize the tax benefit from an uncertain tax position only if it more likely than not to be sustained upon regulatory examination based on the technical merits of the position. The amount of the benefit for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that we believe is more likely than not to be realized upon ultimate settlement of the position. At September 30, 2019, no liability remained for other uncertain income tax positions.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2019		2018
Balance at beginning of year	$	—	$	16
Additions for tax positions		—		10
Settlements		—		(26)
Balance at end of year	$	—	$	—

As noted in the table above, there have been no additional gross uncertain tax positions during fiscal 2019 based on any federal or state tax position.

We are no longer subject to U.S. Federal tax examinations for years before 2015 or state and local for years before 2014, with limited exceptions. For federal purposes, the tax attributes carried forward could be adjusted through the examination process and are subject to examination 3 years from the date of utilization.

We have assessed the application of Internal Revenue Code Section 382 regarding certain limitations on the future usage of net operating losses. No limitation applies as of September 30, 2019 and we will continue to monitor activities in the future.