Income Taxes

The provision for income taxes for the years ended June 30, 2019 and 2018 consists of the following:



	2019			2018
Current income tax (benefit) provision
Federal	$	—		$	—
State	—			—
	—			—
Deferred income tax provision
Federal	44,287			(3,498,532		)
State	12,653			(999,581		)
Change in valuation allowance	(56,941		)	4,498,113
	—			—
Income tax (benefit)	$	—		$	—

Income taxes (benefit) as a percentage of income (loss) for the years ended June 30, 2019 and 2018 differ from statutory federal income tax rate due to the following:



	2019		2018
Statutory federal income tax rate	21.00	%	34.00	%
Permanent differences	0.00	%	(0.51	)%
Tax Act-revaluation of net deferred tax assets	0.00	%	(33.49	)%
Valuation allowance	(21.00	)%	0.00	%
Effective income tax rate	0.00	%	0.00	%

On December 22, 2017, the legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") was enacted. The Tax Act revises the U.S. corporate income tax by, among other things, lowering the corporate income tax rate from 35% to 21%, adopting a quasi-territorial income tax system and setting limitations on deductibility of certain costs (e.g., interest expense).

Due to the complexities involved in the accounting for the Tax Act, on December 22, 2017, the Securities and Exchange Commission's Staff Accounting Bulletin ("SAB")118 was issued to provide guidance to companies that have not yet completed their accounting for the tax Act in the period of enactment. SAB 118 provides that the Company include in its consolidated financial statements a reasonable estimate of the impacts on the Tax Act on earnings to the extent such estimate has been determined. Accordingly, the U.S. provision for income tax for 2018 is based on the reasonable estimate guidance provided by SAB 118.

Pursuant to the SAB 118, the Company is allowed a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. As of December 22, 2018, the Company has completed the accounting for the effects of the Tax Act and there were no additional measurement adjustments.

The components of the net deferred income tax assets and liabilities as of June 30, 2019 and 2018 are as follows:



	2019			2018
Deferred income tax assets:
Net operating loss carryforward	$	7,102,298		$	7,042,134
Executive post retirement costs	166,317			178,788
General business credit	207,698			207,698
Allowance for doubtful accounts	23,207			24,975
Accrued vacation	40,565			46,527
Inventory reserve	102,002			96,813
Accelerated depreciation	127,642			119,980
Warranty reserve	6,736			6,736
Total deferred income tax assets	7,776,465			7,723,651
Valuation allowance	(7,619,657		)	(7,562,716		)
	156,808			160,935
Deferred income tax liabilities:
Accelerated depreciation	(156,808		)	(160,935		)
Total deferred income tax liabilities	(156,808		)	(160,935		)
	$	—		$	—

As of June 30, 2019, the Company has a valuation allowance of $7,619,657, which primarily relates to the federal net operating loss carryforwards. During the year ended June 30, 2019, the valuation allowance increased by $56,941 and during the year ended June 30, 2018, the valuation decreased by $4,498,113. The valuation allowance is a result of management evaluating its estimates of the net operating losses available to the Company as they relate to the results of operations of acquired businesses subsequent to their being acquired by the Company. The Company evaluates a variety of factors in determining the amount of the valuation allowance, including the Company’s earnings history, the number of years the Company’s operating loss and tax credits can be carried forward, the existence of taxable temporary differences, and near-term earnings expectations. Future reversal of the valuation allowance will be recognized either when the benefit is realized or when it has been determined that it is more likely than not that the benefit will be realized through future earnings. Any tax benefits related to stock options that may be recognized in the future through reduction of the associated valuation allowance will be recorded as additional paid-in capital. The Company has available federal and state net operating loss carry forwards of approximately $32,329,000 and $3,273,000, respectively, of which $14,528,000 and $2,811,000, respectively, will expire over the next ten years, $17,353,000 and $461,000, respectively, will expire in years eleven through twenty, and $448,000 and $0, respectively, which will not expire.

The Company continues to monitor the realization of its deferred tax assets based on changes in circumstances, for example, recurring periods of income for tax purposes following historical periods of cumulative losses or changes in tax laws or regulations. The Company’s income tax provision and management’s assessment of the realizability of the Company’s deferred tax assets involve significant judgments and estimates. If taxable income expectations change, in the near term the Company may be required to reduce the valuation allowance which would result in a material benefit to the Company’s results of operations in the period in which the benefit is determined by the Company.

With few exceptions, the Company is no longer subject to audits by tax authorities for tax years prior to the year ended June 30, 2016. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss amount. At June 30, 2019, the Company did not have any significant unrecognized tax positions. The Company has provided what it believes to be an appropriate amount of tax for items that involve interpretation to the tax law. However, events may occur in the future that will cause the Company to reevaluate the current provision and may result in an adjustment to the liability for taxes.