Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.19.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 12 – Income Taxes
 
The Company is taxed as a C Corporation. On December 22, 2017, the U.S. Tax Cuts and JOBS Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. As a result of the Tax Reform Act, the Company recorded a tax expense of $1.7 million in 2017 due to a remeasurement of deferred tax assets and liabilities. 
 
On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB 118”), which provides guidance on accounting for tax effects of the Tax Reform Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Reform Act enactment date for companies to complete the accounting under ASC Topic 740 - Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Reform Act for which the accounting under ASC Topic 740 - Income Taxes is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Reform Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. As of December 31, 2017, the Company had recorded its best estimate for the remeasurement of the deferred tax assets and liabilities. As of December 31, 2018,
management recorded immaterial true-up adjustments to its year-end 2017 provisional estimates and believes that its income tax provision reflects guidance issued by the Internal Revenue Service.
 
The provision (benefit) for income taxes for 2018 and 2017 consists of the following:
 
 
 
For the Years Ended
 
(in thousands)
 
December 31, 2018
 
 
December 31, 2017
 
Current tax provision
 
 
 
 
 
 
 
 
U.S. Federal
 
$
16
 
 
$
1,796
 
State and local
 
 
94
 
 
 
752
 
Total current tax provision
 
 
110
 
 
 
2,548
 
 
 
 
 
 
 
 
 
 
Deferred tax provision (benefit)
 
 
 
 
 
 
 
 
U.S. Federal
 
 
(421
)
 
 
832
 
State and local
 
 
(324
)
 
 
(229
)
Total deferred tax provision (benefit)
 
 
(745
)
 
 
603
 
Provision (benefit) for income taxes
 
$
(635
)
 
$
3,151
 
 
In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. As of December 31, 2018, the Company achieved three years of cumulative pre-tax income after considering permanent items and is forecasting future taxable income. After giving consideration to these factors, management concluded that it was more likely than not that the deferred tax assets would be fully realized, and as a result, no valuation allowance against the deferred tax assets was deemed necessary at December 31, 2018 and 2017.
  
The components of deferred tax assets (liabilities) were as follows:
 
(in thousands)
 
As of

December 31,

2018
 
 
As of

December 31,

2017
 
Deferred tax assets:
 
 
 
 
 
 
 
 
Accrued expenses
 
$
231
 
 
$
818
 
Allowance for doubtful accounts
 
 
64
 
 
 
62
 
Intangibles
 
 
1,186
 
 
 
1,219
 
Goodwill
 
 
3,613
 
 
 
4,124
 
Startup costs
 
 
112
 
 
 
122
 
Deferred rent
 
 
184
 
 
 
119
 
Percentage of completion
 
 
300
 
 
 
-
 
Stock-based compensation
 
 
566
 
 
 
269
 
Net operating losses and credits
 
 
1,434
 
 
 
-
 
Other
 
 
329
 
 
 
-
 
Total deferred tax assets
 
 
8,019
 
 
 
6,733
 
 
 
 
 
 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
 
 
 
 
Fixed assets
 
 
(3,610
)
 
 
(3,050
)
Percentage of completion
 
 
-
 
 
 
(19
)
Total deferred tax liabilities
 
 
(3,610
)
 
 
(3,069
)
 
 
 
 
 
 
 
 
 
Net deferred tax asset
 
$
4,409
 
 
$
3,664
 
 
At December 31, 2018, the Company had tax-effected federal net operating loss carryforwards of approximately $1.2 million which can be carried forward indefinitely. At December 31, 2017, there were no net operating loss carryforwards.
 
The Company performed an analysis of its tax positions and determined that no material uncertain tax positions exist. Accordingly, there is no liability for uncertain tax positions as of December 31, 2018 and 2017. Based on the provisions of ASC Topic 740 - Income Taxes, the Company had no material unrecognized tax benefits as of December 31, 2018 and 2017.
 
A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows:
 
 
 
For the Years Ended
 
 
 
December 31, 2018
 
 
December 31, 2017
 
Federal statutory income tax rate
 
 
21.0
%
 
 
34.0
%
State income taxes, net of federal tax effect
 
 
5.5
%
 
 
4.6
%
Change in federal tax rate
 
 
-
%
 
 
43.2
%
Stock based compensation – restricted stock
 
 
-1.2
%
 
 
-
 
Return to provision adjustment
 
 
7.3
%
 
 
-
 
Permanent differences
 
 
-12.4
%
 
 
-0.2
%
Tax credits
 
 
5.2
%
 
 
-3.5
%
Other
 
 
0.2
%
 
 
3.5
%
Effective tax rate
 
 
25.6
%
 
 
81.6
%