Note L - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE L — INCOME TAXES

Due to Milestone Scientific's history of operating losses, a full valuation allowances have been provided for all of Milestone Scientific's deferred tax assets. At December 31, 2021 and 2020, no recognition was given to the utilization of the remaining net operating loss carry forwards in each of these periods.

Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at  December 31, 2021 and 2020 are as follows:     

	2021			2020
Allowance for Doubtful Accounts	$	2,000		$	2,000
Warranty Reserve		3,000			5,000
Impaired Assets					-
Inventory Reserve		108,000			110,000
Deferred Officer's Compensation		439,000			816,000
Depreciation and Amortization		(52,000	)		(67,000	)
Net Operating Loss Carryforwards		18,895,000			17,993,000
Tax Credits		660,000			416,000
Other		45,000			10,000
Subtotal		20,100,000			19,285,000
Valuation allowance		(20,100,000	)		(19,285,000	)
Non-current deferred tax asset		-			-

As of December 31, 2021 and 2020,  federal net operating loss carry-forwards are approximately $68,300,000 and $66,000,000, respectively.  As of December 31, 2021, Milestone Scientific has net operating losses generated before December 31, 2017 will be available to offset future income, if any, through December 2037. Net operating losses generated in 2018 or after can be carried forward indefinitely.             

State net operating losses were approximately $63,400,000 and $56,300,000 for the periods ended December 31, 2021 and 2020, respectively. Net operating losses will be available to offset future taxable income, if any, through December 2041.                

The utilization of Milestone Scientific's net operating losses may be subject to a substantial limitation due to the "change of ownership provisions" under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a 100% valuation allowance for all its deferred tax assets due to uncertainty as to their future realization. As of December 31, 2021, and 2020, state tax liability was approximately $300 and $24,000 respectively. Such expense was recognized in the accompanying consolidated financial statements.

Accounting for uncertainties in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure, and transition. At December 31, 2021 and 2020, we had no uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Statements of Operations. No interest and penalties are present for periods open. Tax returns for the 2018, 2019, and 2020 years are subject to audit by federal and state jurisdictions.     

A reconciliation of the statutory tax rates for the years ended December 31, is as follows:   

	2021			2020
Statutory rate		21.00	%		21.00	%
State income tax-all states		7.44	%		1.00	%
NOL Expiration		-9.13	%		-11.00	%
Other		-7.79	%		8.00	%
Subtotal		11.52	%		19.00	%
Valuation allowance		-11.52	%		-19.00	%
Effective tax rate		0	%		0	%