Note 4. Income taxes

3 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income taxes

We recognized income tax expense of $40,579 and $197,922 for the three-month periods ended March 31, 2017 and 2016, respectively. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full fiscal year and this rate is applied to our results for the year-to-date period, and then adjusted for any discrete period items. For the three-month period ended March 31, 2017, the variance between the Company’s effective tax rate and the U.S. statutory rate of 34% is primarily attributable to the excess stock-based compensation tax benefit of $77,272 recognized in income tax expense during the period, in connection with the Company’s adoption of ASU 2016-09, as well as, foreign statutory tax rate differentials and tax credits.

During the three-month period ended March 31, 2016, the Company released $78,400 of its valuation allowance related to federal and state net operating losses, which resulted in a net benefit of $40,875. The tax benefits from US net operating losses that were previously reserved were acquired as part of the acquisition of PrecisionIR (PIR). At the date of acquisition, management believed it was more likely than not that the benefits would not be used due to the uncertainty of future profitability and also due to statutory limitations on the amount of net operating losses that can be carried forward in an acquisition. The remaining valuation allowance on the federal and state net operating losses related to PIR was released during the fourth quarter of 2016, as such no valuation allowance remains on those federal and state net operating losses as March 31, 2017, which is consistent with projections of future taxable domestic income.