Note 12. Income taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income taxes

The benefit for income taxes consisted of the following components for the years ended December 31:

	2015			2014
Current:
Federal	$	257,098		$	631,129
State		47,256			97,186
Foreign		193,055			(9,278	)
Total Current		497,409			719,037
Deferred:
Federal		(468,887	)		(776,467	)
State		(67,423	)		(130,535	)
Foreign		(93,586	)		(91,510	)
Total Deferred		(629,896	)		(998,512	)
Total benefit for income taxes	$	(132,487	)	$	(279,475	)

Reconciliation between the statutory rate and the effective tax rate is as follows at December 31:

	2015						2014
	Amount			Percentage			Amount			Percentage
Federal statutory tax rate	$	4,113			34.0	%	$	(80,699	)		(34.0	)%
State tax rate		(1,042	)		(8.6	)%		(12,579	)		(5.3	)%
Permanent difference  - stock-based compensation		27,410			226.6	%		15,053			6.3	%
Permanent difference  - transaction costs		-			-			11,630			4.9	%
Permanent difference – other		8,888			73.4	%		3,935			1.7	%
Permanent items – disallowed interest		30,433			251.6	%		62,185			26.2	%
Provision to return		(30,797	)		(254.6	)%		(10,206	)		(4.3	)%
Change in unrecognized tax benefits		57,749			477.4	%		-			-
Write-off of net operating losses		176,034			1,455.2	%		-			-
Foreign rate differential		(33,032	)		(273.1	)%		(63,013	)		(26.6	)%
Research and development credit		(27,623	)		(228.3	)%		-			-
UK Rate Change		(3,898	)		(32.2	)%		(23,260	)		(9.8	)%
Other		14,738			121.8	%		-			-
Sub-total		222,973			1,843.2	%		(96,954)			(40.9	)%
Change in valuation allowance		(355,460	)		(2,938.4	)%		(182,521)			(76.9	)%
Total	$	(132,487	)		(1,095.2	)%	$	(279,475)			(117.8	)%

Components of net deferred income tax assets, including a valuation allowance, are as follows at December 31:

	2015			2014			Change
Assets:
Net operating loss	$	254,123		$	561,358		$	(307,235	)
Deferred revenue		51,914			35,347			16,567
Allowance for doubtful accounts		135,663			145,335			(9,672	)
Stock options		345,779			211,824			133,955
Basis difference in intangible assets		118,257			190,295			(72,038	)
Prepaid D&O Insurance		10,341			13,996			(3,655	)
Foreign tax credits carryforward		1,180,833			1,180,833			-
Other		26,916			759			26,157
Total deferred tax asset		2,123,826			2,339,747			(215,921	)
Less:  Valuation allowance		(1,407,955	)		(1,763,415	)		355,460
Total net deferred tax asset		715,871			576,332			139,539
Liabilities
Prepaid expenses		(30,460	)		(32,176	)		1,716
Basis difference in fixed assets		(4,833	)		(19,222	)		14,389
Capitalized software		(171,584	)		-			(171,584	)
Debt discount - convertible note payable		-			(200,559	)		200,559
Purchase of intangibles		(505,586	)		(950,863	)		445,277
Total deferred tax liability		(712,463	)		(1,202,820	)		490,357
Total net deferred tax asset / (liability)	$	3,408		$	(626,488	)	$	629,896

The Company has $1,407,955 of total valuation allowance for deferred tax assets as of December 31, 2015.  The valuation allowance relates to PIR federal net operating losses, state net operating losses, foreign net operating losses and foreign tax credit carryforwards. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. It has been determined that it is more likely than not that the deferred tax assets will not be realized, as it has been deemed unlikely that there will be generation of taxable income for the subsidiaries that carry these losses or that sufficient foreign source income would be generated to use the foreign tax credits. If in the future, we determine based on expected profitability, that these deferred tax assets are more likely than not to be realized, a release of all, or part, of the related valuation allowance could result in an immediate material income tax benefit in the period of release. Such release of the valuation allowance could occur within the next 12 months upon resolution of the aforementioned uncertainties.

As of December 31, 2015, the Company had $57,749 of unrecognized tax benefits which is recorded in Income taxes payable on the Consolidated Balance Sheets, all of which, if recognized, would affect our effective tax rate. As of December 31, 2014, the Company had no unrecognized tax benefits. The aggregate changes in the balance of unrecognized tax benefits were as follows:

	2015		2014
Balance as of January 1:	$	-	$	-
Change related to current year positions		57,749		-
Change related to prior year positions		-		-
Change related to statute expirations		-		-
Balance as of December 31:	$	57,749	$	-

  The Company has not recorded deferred income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practical to estimate the amount of deferred tax liabilities on such undistributed earnings. Undistributed earnings are insignificant as of December 31, 2015 and 2014.  The Company is subject to income taxation by both federal and state taxing authorities. Income tax returns for the years ended December 31, 2014, 2013, 2012 and 2011 are open to audit by federal and state taxing authorities.