Note K - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE K — INCOME TAXES

Milestone Scientific accounts for income taxes under the asset and liability method which requires deferred tax assets and liabilities to be computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

At December 31, 2023 and 2022, 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 Consolidated Statements of Operations. No interest and penalties are present for periods open. Tax returns for the 2020, 2021, and 2022 years are subject to audit by federal and state jurisdictions.

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, 2023 and 2022, 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, 2023 and 2022 are as follows:     

	2023			2022
Allowance for Doubtful Accounts		2,000		$	2,000
Warranty Reserve		-			2,000
Impaired Assets		-			-
Capitalized Sec. 174 R&D		344,000			242,000
Inventory Reserve		300,000			242,000
Deferred Officer's Compensation		689,000			428,000
Depreciation and Amortization		(44,000	)		(56,000	)
Right of Use Asset		(86,000	)		(108,000	)
Lease Liability		93,000			116,000
Net Operating Loss Carryforwards		19,920,000			19,315,000
Tax Credits		558,000			688,000
Other		302,000			147,000
Subtotal		22,080,000			21,018,000
Valuation allowance		(22,080,000	)		(21,018,000	)
Non-current deferred tax asset		-			-

As of December 31, 2023 and 2022,  federal net operating loss carry-forwards are approximately $74,500,000 and $71,700,000, respectively. As of December 31, 2023, Milestone Scientific has $38,100,000 net operating losses generated before December 31, 2017 that will be available to offset future income, if any, through December 2037. Additionally, as of December 31, 2023, Milestone Scientific has $36,400,000 of net operating losses generated in 2018 or after that can be carried forward indefinitely.

State net operating losses were approximately $63,300,000 and $60,500,000 for the periods ended December 31, 2023 and 2022, 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 of its deferred tax assets due to uncertainty as to their future realization. 

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. No interest and penalties are present for periods open. Tax returns for the 2020, 2021, and 2022 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:   

	2023			2022
Statutory Rate		21.00	%		21.00	%
State income tax - all states		0.88	%		-2.74	%
Stock compensation		0.58	%		-2.57	%
NOL Expiration		-5.05	%		-4.69	%
Return to Provision		-2.21	%		0.00	%
Other		0.03	%		-0.56	%
Subtotal		15.23	%		10.44	%
Valuation Allowance		-15.23	%		-10.44	%
Effective tax Rate		0.00	%		0.00	%