Note L - Income Taxes

12 Months Ended

Dec. 31, 2016

NOTE L

— INCOME TAXES

Due to Milestone Scientific®€™

s history of operating losses, a full valuation allowances has been provided for all of Milestone Scientific®€™s deferred tax assets at

December

31,

2016

and

2015,

no recognition was given to the utilization of the remaining net operating loss carryforwards.

Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at

December

31,

2016

and

2015

are as follows:

	2016			2015
Current assets
Allowance for doubtful accounts-short term	$	4,000		$	2,000
Warranty reserve		36,000			43,000
Deferred officers compensation		395,000			643,000
Subtotal		435,000			688,000
Valuation allowance		(435,000	)		(688,000	)
Non-current assets
Depreciation and amortization	$	135,000		$	149,000
Net operating loss carryforward		18,456,000			16,160,000
Federal tax effect of state deferred tax assets		-			(117,000	)
Subtotal		18,591,000			16,192,000
Valuation allowance		(18,591,000	)		(16,192,000	)

As of

December

31,

2016,

federal net operating loss carryforwards are approximately

$51,807,000.

As of

December

31,

2015

and Milestone Scientific has federal net operating loss carryforwards of approximately

$46,875,000,

which is comprised solely of losses attributable Milestone Scientific and its subsidiaries. Net operating losses will be available to offset future taxable income, if any, through

December

2036.

As of

December

31,

2016

state net operating losses were approximately

$10,047,000.

As of

December

31,

2015

Milestone Scientific has state net operating loss carryforwards of approximately

$3,771,000.

Net operating losses will be available to offset future taxable income, if any, through

December

2036.

The utilization of Milestone

Scientific's net operating losses

may

be subject to a substantial limitation due to the "change of ownership provisions" under Section

382

of the Internal Revenue Code and similar state provisions. Such limitation

may

result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a

100%

valuation allowance for all of its deferred tax assets due to uncertainty as to their future realization.

For the year ended

December

31,

2016

and

2015,

ate tax liability was approximately

$13,000

and

$62,000.

Such expense was recognized in the accompanying consolidated financial statements.

A reconciliation of the statutory tax rates for the years ended

December

31,

is as follows:

	2016			2015

Statutory rate		34	%		34	%
State income tax - all states		6	%		6	%
Non-deductible stock based compensation		3	%		-
		43	%		40	%
Current year valuation allowance		(43	%)		(40	%)
Benefit for income taxes		0	%		0	%

Accounting for Uncertain Tax Positions:

Accounting for uncertainties in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in

a tax return, and also provides guidance on derecognition, classification, interest and penalties, disclosure and transition. At

December

31,

2016,

and

2015,

we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Statements of Operations. No interest and penalties are present for periods open. Tax returns for the

2013,

2014,

and

2015

years are subject to audit by federal and state jurisdictions.