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INCOME TAXES
12 Months Ended
Dec. 31, 2014
INCOME TAXES  
INCOME TAXES

9.INCOME TAXES

 

The provision for income taxes consists of the following:

 

 

 

For the Years Ended December 31,

 

 

 

2014

 

2013

 

2012

 

Current tax provision

 

 

 

 

 

 

 

Federal

 

$

 

$

83,470 

 

$

1,785 

 

State

 

8,177 

 

7,502 

 

8,033 

 

Total current provision

 

8,177 

 

90,972 

 

9,818 

 

 

 

 

 

 

 

 

 

Deferred tax provision

 

 

 

 

 

 

 

Federal

 

 

 

 

State

 

 

 

 

Total deferred tax provision

 

 

 

 

Total income tax provision

 

$

8,177 

 

$

90,972 

 

$

9,818 

 

 

The Company has $9.4 million in tax benefits attributable to carry back losses for federal tax purposes.  The loss carry forwards will begin to expire in 2028 for federal tax purposes and began to expire for state tax purposes in 2013.  The Company also has credits for alternative minimum taxes (“AMT”) paid of $202 thousand that are available to offset future federal income taxes, excluding AMT.  Such credits do not expire.

 

Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes.  The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

 

 

 

December 31,

 

 

 

2014

 

2013

 

Deferred tax assets

 

 

 

 

 

Net operating loss carry forwards

 

$

4,704,612

 

$

3,819,961

 

Credit for alternative minimum tax paid

 

201,773

 

201,773

 

Accrued expenses and reserves

 

1,424,969

 

1,350,125

 

Employee stock option expense

 

315,711

 

315,711

 

Nonemployee stock option expense

 

15,546

 

15,546

 

Inventory

 

287,190

 

338,253

 

Litigation proceeds subject to stipulation

 

2,929,640

 

2,929,640

 

Deferred tax assets

 

9,879,441

 

8,971,009

 

Deferred tax liabilities

 

 

 

 

 

Property and equipment

 

(493,985

)

(393,343

)

Deferred tax liabilities

 

(493,985

)

(393,343

)

Net deferred assets

 

9,385,456

 

8,577,666

 

Valuation allowance

 

(9,385,456

)

(8,577,666

)

Net deferred tax assets

 

$

 

$

 

 

The valuation allowance increased $807,790 and $2,417,018 for 2014 and 2013, respectively.

 

A reconciliation of income taxes based on the federal statutory rate and the effective income tax rate is summarized as follows:

 

 

 

December 31,

 

 

 

2014

 

2013

 

2012

 

Income tax at the federal statutory rate

 

35.0

%

35.0

%

35.0

%

State tax, net of federal tax

 

2.9

 

2.9

 

2.9

 

Increase in valuation allowance

 

(34.3

)

(39.3

)

(28.0

)

Permanent differences

 

(0.7

)

(0.3

)

1.2

 

Alternative minimum tax

 

 

(1.4

)

 

Adjustments to temporary differences for stock options

 

 

 

(11.0

)

Other

 

(3.2

)

1.6

 

(0.3

)

Effective tax rate

 

(0.3

)%

(1.5

)%

(0.2

)%

 

The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions.  The Company’s federal income tax returns for all tax years ended on or after December 31, 2011, remain subject to examination by the Internal Revenue Service.  The Company’s state and local income tax returns are subject to examination by the respective state and local authorities over various statutes of limitations, most ranging from three to five years from the date of filing.