Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

9

–

Income Taxes

At

December 31, 2020,

the Company had approximately

$1,719,598

of federal research and development tax credits. If

not

utilized, the research and development tax credits expire from

2028

-

2040.

For the year ended

December 31, 2020

and

2019,

the Company has provided a full valuation allowance against all of the net deferred tax assets in the amount of

$3,381,133

and

$2,497,414,

respectively. This was based on management's assessment, including the last

two

years of operating losses, that it is more likely than

not

that the net deferred tax assets

may

not

be realized in the future.

On

March 27, 2020,

the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted by the United States Congress. As a result of the enactment of the CARES Act, net operating losses (“NOL's”) generated in

2018

-

2020

can now be carried back for

five

years and resulted in the Company recognizing approximately

$1.5

million of a tax benefit, of which

$.7

million is a receivable at

December 31, 2020.

We continue to evaluate for potential utilization of the Company's deferred tax asset, which has been fully reserved for, on a quarterly basis, reviewing our economic models, including projections and timing of orders, the commencement of operations of the CVD Materials segment and cost containment measures.

The expense/(benefit) for income taxes includes the following:

	2020			2019
Current:
Federal	$	(1,528,305	)	$	-
State		950			(11,506	)
Total current tax provision		(1,527,355	)		(11,506	)
Deferred:
Federal		-			1,425,414
State		---			---
Total deferred tax provision		-			1,425,414
Income tax expense / (benefit)	$	(1,527,355	)	$	1,413,908

The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:

	2020			2019
Deferred income tax assets:
Allowance for doubtful accounts	$	35,442		$	5,293
Inventory capitalization		6,969			7,107
Impairment Charge		712,683			-
Research & development tax credits		1,719,598			588,096
Compensation costs		211,363			202,287
Vacation accrual		89,626			142,230
Interest expense carryforward		223,768			144,340
Net operating loss carryforward		925,912			1,798,315
Other items		12,248			52,232
Total deferred tax asset		3,937,609			2,939,900
Deferred incomes tax liability:
Property and equipment - tax over book depreciation		(556,476	)		(442,486	)
Less valuation allowance		(3,381,133	)		(2,497,414
Net long-term deferred tax asset	$	-		$	-

The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:

	2020			2019
Expected provision at federal statutory tax rate (21%)	$	(1,596,485	)	$	(1,031,888	)
Provision for valuation allowance		883,796			2,497,414
Foreign tax loss		70,492			57,856
Net operating loss carryback		(1,527,355	)		-
State taxes, net of federal benefit		(36,832	)		(11,506	)
Federal research & development credit		(64,266	)		(174,416	)
Other permanent differences		743,295			76,448
Income (benefit) / tax expense	$	(1,527,355	)	$	1,413,908

The Company's foreign subsidiary, CVD Tantaline ApS incurred a loss of approximately

$336,000,

which would provide a

$74,000

deferred tax asset as of

December 31, 2020,

based on the standard corporate tax rate of

22%

in Denmark. For the year ended

December 31, 2019

the Company had a loss of

$276,000

which would provide a

$61,000

deferred tax asset. However, sufficient uncertainty exists as to the realizability of these assets such that a full valuation allowance has been necessary.