NOTE 8 - INCOME TAXES

The provision for income taxes for the three months and nine months ending June 30, 2018 and 2017 is as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2018		2017		2018		2017
Income tax expense	$	262,550	$	365,200	$	157,300	$	557,200

Recent tax reform was passed on December 22, 2017, commonly referred to as the “Tax Cuts and Jobs Act.” This Act changes the US federal corporate tax brackets that had a maximum effective rate of 35% to a flat rate of 21% for tax years beginning after December 31, 2017. Consequently, deferred tax assets and liabilities have been remeasured, resulting in a deferred income tax benefit of $264,000, which is included as a component of income tax expense (benefit) from continuing operations for the nine months ended June 30, 2018.

Pursuant to the above mentioned federal tax rate change, the Company has used a blended tax rate for the nine months ended June 30, 2018. This has been done by applying the Company’s previous bracket rate of 34% and the new 21% flat rate pro rata, based on the number of days in the fiscal year before and after January 1, 2018.

The Company uses the asset-liability method of computing deferred taxes in accordance with FASB Accounting Standards Codification (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 cost of shareholder usage, and the use of the blended tax rate and remeasurement of deferred tax assets and liabilities due to the federal tax rate changes noted above.

As of June 30, 2018, September 30, 2017, and June 30, 2017, the Company’s deferred tax liability was $486,500, $810,600 and $799,700, 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.