6. Income Taxes

The income tax provision from operations included in the consolidated statements of income consists of the following:


	December 31,		December 31,
	2019		2018
	($000’s omitted)
Current:
Federal	$	363	$	639
State		45		2
		408		641
Deferred:
Federal		171		96
		171		96
	$	579	$	737

The reconciliation of the federal statutory income tax rate to the Company’s effective tax rate based upon the total income tax provision from operations is as follows:


	December 31,		December 31,
	2019		2018

Federal statutory rate	21.0	%	21.0	%
Permanent non-deductible expenses	2.6	%	0.3	%
Business credits	(3.0)	%	(0.6)	%
ESOP dividend	(0.6)	%	(0.4)	%
Stock compensation	(0.1)	%	(0.4)	%
Domestic production activities deduction	0.0	%	(0.4)	%
Foreign-derived intangible income deduction	(1.2)	%	(1.8)	%
State taxes, net of federal benefit	1.3	%	0.0	%
Other	1.5	%	(0.3)	%
	21.5	%	17.4	%

At December 31, 2019 and 2018, the deferred tax assets (liabilities) were comprised of the following:


	December 31,		December 31,
	2019		2018
	($000’s omitted)
Deferred Tax Assets:
Inventories	$	473	$	417
Accrued employees compensation and benefits costs		446		478
Accrued arbitration award and related liability		324		234
Net operating loss and credit carryforwards		236		248
Bad debt reserve		71		37
Warranty reserve		88		90
Total deferred tax assets		1,638		1,504
Valuation allowance		(236)		(248)
Net deferred tax assets		1,402		1,256

Deferred tax liabilities:
Prepaid expenses		(32)		(28)
Property, plant and equipment		(1,238)		(910)
Other		—		(14)
Minimum pension liability		(25)		(9)
Total deferred tax liabilities		(1,295)		(961)
Net deferred tax assets	$	107	$	295

In assessing the ability of the Company to realize the benefit 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. Based upon the level of historical taxable income, the opportunity for net operating loss carrybacks, and projections for future taxable income over the periods which deferred tax assets are deductible, management believes it is more likely than not the Company will generate sufficient taxable income to realize the benefits of these deductible differences at December 31, 2019, except for a valuation allowance of $236,000 ($248,000 – 2018) related to certain state net operating loss carryforwards, state tax credit carryforwards and other state net deferred tax assets. At December 31, 2019, the Company has net operating loss carryforwards with full valuation allowances from Pennsylvania of approximately $1,620,000 ($1,805,000 – 2018), which begin expiring in 2020, and Arkansas of approximately $0 ($31,000 – 2018). The Company also has a New York state tax credit carryforward at December 31, 2019 of approximately $139,000 ($131,000 – 2018), which begins to expire in 2023.

There are no uncertain tax positions or unrecognized tax benefits for 2019 and 2018. The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities. The 2016 through 2018 Federal and state tax returns remain subject to examination.