Note 6 - Income Taxes

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 6. INCOME TAXES

On a quarterly basis, we estimate what our effective tax rate will be for the full year and record a quarterly income tax provision based on the anticipated rate. As the year progresses, we refine our estimate based on the facts and circumstances, including discrete events, by each tax jurisdiction.

The effective tax rate for the three months ended September 30, 2021 was 26.0% compared to 23.7% for the three months ended September 30, 2020. The effective tax rate for the nine months ended September 30, 2021 was 22.8% compared to 24.3% for the nine months ended September 30, 2020. The primary drivers of the change in the effective tax rate is attributable to the PPP loan forgiveness being non-taxable and additional valuation allowance created from anticipated temporary differences. There are also discrete items related to an IRS exam and return to provision adjustments from the 2020 tax return. It is more likely than not an amount payable will be due at an estimated $44k for the IRS exam. A reserve has been set up for the anticipated adjustment. We recorded an income tax expense of $646k and $638k for the nine months ended September 30, 2021 and 2020, respectively.