NOTE 8 – Income Taxes

The provision for income taxes for the years ended September 30, 2017 and 2016 are as follows:

	2017		2016
Income tax provision	$	834,000	$	723,500

The effective income tax rate varies from the statutory federal income tax rate as follows:

	2017		2016
Statutory federal income tax rate	34.0	%	34.0	%
Increase (decrease):
State income taxes, net of federal benefit	5.7		5.8
Nondeductible variable costs of shareholder usage	2.9		4.0
Other miscellaneous adjustments	(1.1)		0.0
Effective income tax rate	41.5	%	43.8	%

The Company uses the asset-liability method of computing deferred taxes in accordance with FASB ASC Topic 740. The difference between the effective tax rate and the statutory tax rates is due primarily to the effects of the graduated tax rates, state taxes net of the federal tax benefit and nondeductible variable costs of shareholder usage.

The Company has early adopted Accounting Standards Update (ASU) 2015-2017, Balance Sheet Classification of Deferred Taxes, to simplify and improve the usefulness of the financial statements. The amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.

This ASU is effective for financial statements issued for annual periods beginning after December 15, 2018. Earlier application is permitted as of the beginning of an interim or annual reporting period. The Company has made this classification update as of October 1, 2016, and has applied this change retrospectively to all periods presented. Below is a table summarizing the changes in presentation for the periods ended September 30, 2017 and 2016:

	2017		2016
Total assets – original presentation	$	17,888,598	$	17,969,672
Total liabilities – original presentation		3,243,357		4,416,733

Total assets – change in presentation		(118,700)		(108,000)
Total liabilities – change in presentation		(118,700)		(108,000)

Total assets – updated presentation		17,769,898		17,861,672
Total liabilities – updated presentation		3,124,657		4,308,733

As of September 30, 2017 and 2016, the Company’s deferred tax liability was $810,600 and $846,200, respectively. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. The majority of the balance is due to timing differences of depreciation expense, caused by the use of accelerated depreciation methods for tax calculations.