|12 Months Ended|
Dec. 31, 2018
|Income Tax Disclosure [Abstract]|
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the U.S. tax code by, among other items, reducing the federal corporate tax rate from its highest rate of 35% to a single rate of 21%.
Certain provisions in the Tax Act, such as providing for full expensing of certain depreciable property, the limitation on interest expense deductibility, the limitation on the deductibility of certain executive compensation and net operating loss carryforwards have had an impact on the Company and have been reflected in the consolidated financial statements for the year ended December 31, 2018.
The Company has evaluated the impact of the new revenue standard under ASC 606 for tax purposes. The impact has been reported in the financial statements as of December 31, 2018 and accounted for tax purposes under deferred tax liabilities as a Section 481(a) adjustment. It is a non-automatic change in accounting method based on current Internal Revenue Service (“IRS”) regulations at this time and is subject to review and approval by the IRS.
The following table presents the income tax provision from continuing operations for the years ended December 31 as indicated:
The following table presents the total income tax provision for the years ended December 31 as indicated:
The following table presents the temporary differences and carryforwards, which give rise to deferred tax assets and liabilities as of December 31 as indicated:
As of December 31, 2018, the Company had net operating loss (“NOL”) carryforwards of approximately $2.1 million available to offset future federal taxable income. The Tax Act allows for an indefinite carryforward of the NOL to use against future taxable income, subject to a limitation of 80 percent of taxable income each year.
As of December 31, 2018, the non-current deferred tax liabilities increased to $6.1 million from $4.7 million as of December 31, 2017 primarily due to additional tax depreciation in excess of book depreciation. The Tax Act provides for the full expensing of certain depreciable property for 2018 and through 2022 and partial expensing through 2026.
The carrying amounts of deferred tax assets are reduced by a valuation allowance, if based on the available evidence, it is more likely than not such 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 the deferred tax assets are expected to be recovered or settled. In the assessment for a valuation allowance, appropriate consideration is given to positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability and tax planning alternatives. If the Company determines it will not be able to realize all or part of the deferred tax assets, a valuation allowance would be recorded to reduce deferred tax assets to the amount that is more likely than not to be realized.
Based on assumptions with respect to forecasts of future taxable income and tax planning, among others, the Company anticipates being able to generate sufficient taxable income to utilize the deferred tax assets. Therefore, the Company has not recorded a valuation allowance against deferred tax assets. The minimum amount of future taxable income required to be generated to fully realize the deferred tax assets as of December 31, 2018 is approximately $13.4 million.
The following table presents the differences between the Company’s effective income tax rate and the federal statutory rate on income from continuing operations for the years ended December 31 as indicated:
The Company had gross unrecognized tax benefits of $5,000 as of both December 31, 2018 and 2017. The Company believes that it is reasonably possible that the liability for unrecognized tax benefits related to certain state income tax matters may be settled within the next twelve months. The federal statute of limitation has expired for tax years prior to 2015 and relevant state statutes vary. The Company is currently not under any income tax audits or examinations and does not expect the assessment of any significant additional tax in excess of amounts provided.
The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years as indicated:
The Company accrues interest and penalties related to unrecognized tax benefits as interest expense and other general and administrative expenses, respectively, and not as a component of income taxes. Decreases in interest and penalties are due to settlements with taxing authorities and expiration of statutes of limitation. During the years ended December 31, 2018 and 2017, the Company recognized $1,000 each year in interest and penalties. The Company had accrued as a current liability $11,000 and $9,000 for the future payment of interest and penalties as of December 31, 2018 and 2017, respectively.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef