NOTE

INCOME TAXES

Income tax provisions for fiscal

2016

through

2018

consisted of the following:

	Year Ended March 31
	2018		2017			2016
Current taxes
Federal	$	5,899,574	$	6,034,924		$	5,754,428
State		160,670		138,689			186,822
Deferred taxes
Federal		31,800		(25,196	)		(55,254	)
State		4,108		(1,275	)		(1,214	)
Income tax provision	$	6,096,152	$	6,147,142		$	5,884,782

A reconciliation of income tax provisions at the U.S. statutory rate for fiscal

2016

through

2018

is as follows:

	Year Ended March 31
	2018			2017			2016
Tax expense at U.S. statutory rate	$	6,282,771		$	6,645,733		$	6,272,341
State income taxes, net of Federal benefit		103,240			83,116			118,057
Domestic manufacturing deduction		(495,361	)		(536,063	)		(476,932	)
Municipal interest		(1,378	)		(4,207	)		(4,171	)
Tax Reform Act effect on deferred tax assets		206,693			-			-
Other		187			(41,437	)		(24,513	)
Income tax provision	$	6,096,152		$	6,147,142		$	5,884,782

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of

March

31,

2018

and

2017

were as follows:

	March 31
	2018		2017
Paid time off accrual	$	59,171	$	109,298
Inventory reserve		41,572		81,743
Depreciation and amortization		81,385		52,378
Stock-based compensation deductions		55,886		86,335
Unrealized loss on marketable securities		273,360		21,852
Other		61,281		5,449
Deferred tax assets	$	572,655	$	357,055

Realizations of stock-based compensation deductions are credited to “Additional paid-in capital” and included in “Tax benefit of stock-based compensation” on our statements of shareholders’ equity. Credits of

$32,616

in fiscal

2017

were attributed to stock-based compensation deductions. The “Additional paid-in capital” credits also included the tax benefit of stock-based compensation deductions in that year.

The amounts credited to “Additional paid-in capital” were the tax benefits of the deductions to the extent they exceeded the corresponding compensation expense recognized for financial reporting purposes. “Tax benefit of stock-based compensation” represented the tax benefits of deductions for stock-based compensation to the extent they exceeded the corresponding compensation expense recognized for financial reporting purposes. Cash we received from the exercise of stock options related to excess tax benefits is included in “Proceeds from sale of common stock” in the statement of cash flows for the year in which the option was exercised and cash received.

The Act “To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year

2018”

(the “Tax Reform Act”) was enacted

December

22,

2017.

The Tax Reform Act reduced certain Federal corporate income tax rates effective

January 1, 2018

and changed certain other provisions. Effective tax rates for the year ended

March

31,

2018,

are blended rates reflecting the estimated benefit of Federal tax rate reductions for fiscal

2018.

These benefits were partially offset by a

one

-time

$206,693

unfavorable impact of a revaluation of our deferred tax assets. The revaluation of our deferred tax assets increased income tax provisions for the year ended

March

31,

2018,

and reduced deferred tax assets as of

March

31,

2018.

We had

unrecognized tax benefits as of

March

31,

2018,

and we do

not

expect any significant unrecognized tax benefits within

months of the reporting date. We recognize interest and penalties related to income tax matters in income tax expense. As of

March

31,

2018

we had

accrued interest related to uncertain tax positions. The tax years

1999

and

2013

through

2016

remain open to examination by the major taxing jurisdictions to which we are subject.