INCOME TAXES

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

The components of income tax expense (benefit) consists of the following: 

	December 31,
	2017			2016
Deferred:
Federal	$	1,218,000		$	(44,000	)
State		(60,000	)		(9,000	)
		1,158,000			(53,000	)
Change in valuation allowance		(1,158,000	)		53,000
	$	0		$	0

At December 31, 2017, the Company had federal net operating loss carryforwards of approximately $8,200,000 ($7,500,000 - 2016) and various state net operating loss carryforwards of approximately $3,300,000 ($2,800,000 - 2016) which expire from 2018 through 2037.  These carryforwards exclude federal net operating loss carryforwards from inactive subsidiaries and net operating loss carryforwards from states that the Company does not presently operate in.  Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating loss carryforwards before utilization.

At December 31, 2017, a net deferred tax asset, representing the future benefit attributed primarily to the available net operating loss carryforwards and defined benefit plan expenses in the amount of approximately $2,326,000 ($3,484,000 - 2016), had been fully offset by a valuation allowance because management believes that the statutory limitations on utilization of the operating losses and concerns over achieving profitable operations diminish the Company’s ability to demonstrate that it is more likely than not that these future benefits will be realized before they expire.

The following is a summary of the Company's temporary differences and carryforwards which give rise to deferred tax assets and liabilities.

	December 31,
	2017			2016
Deferred tax assets (liabilities):
Net operating loss carryforwards	$	1,957,000		$	2,735,000
Defined benefit pension liability		69,000			324,000
Reserves and accrued expenses payable		300,000			425,000
Gross deferred tax asset		2,326,000			3,484,000
Deferred tax asset valuation allowance		(2,326,000	)		(3,484,000	)
Net deferred tax asset	$	0		$	0

The differences between the U.S. statutory federal income tax rate and the effective income tax rate in the accompanying statements of operations are as follows:

	December 31,
	2017			2016
Statutory U.S. federal tax rate		34.0	%		34.0	%
Change in valuation allowance		1,543.7			(16.2	)
Expired stock-based compensation		(3.2	)		(19.1	)
State taxes		80.2			2.8
Revaluation of deferred taxes for Federal rate change		(1,647.8	)		0.0
Other permanent non-deductible items		(6.9	)		(1.5	)
Effective income tax rate		0.0	%		0.0	%

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (3) changing rules related to usage and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017; (4) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries for tax years beginning after December 31, 2017; and (5) implementing a territorial tax system and imposing a transition toll tax on deemed repatriated earnings of foreign subsidiaries.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has recognized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in its financial statements for the year ended December 31, 2017. As of December 31, 2017, the Company has completed most of its accounting for the tax effects of the Act. If revisions are needed as new information becomes available, the final determination of the deemed re-measurement of the deferred assets and liabilities or other applicable provisions of The Act will be completed as additional information becomes available, but no later than one year from the enactment of the 2017 Tax Act.

The deferred U.S. income tax expense for 2017 primarily represents a one-time, non-cash expense of $1,236,000 relating to the revaluation of deferred tax assets offset by a reduction of the valuation allowance in an equal amount. This resulted in a net zero effect on the provision for income tax.