8.	INCOME TAXES

The provision for income taxes consists of the following:

	Year ended December 31,

	2018		2017			2016
Current taxes:
Federal	$	4,612,874	$	5,513,691		$	8,571,034
State		40,958		(26,580	)		98,881
Total current taxes		4,653,832		5,487,111			8,669,915
Deferred taxes:
Federal		86,634		1,548,247			(2,647,363	)
State		3,542		2,169			(19,787	)
Total deferred taxes		90,176		1,550,416			(2,667,150	)
Total provision for income taxes	$	4,744,008	$	7,037,527		$	6,002,765

On December 22, 2017, President Trump signed comprehensive tax legislation commonly referred to as the Tax Cuts and Job Act ("Tax Act"). The Tax Act makes complex changes to the tax law which will impact the 2017 year, including but not limited to a re-measurement of deferred tax assets and liabilities as a result of the corporate tax rate change from 35% to 21%. Based on the initial analysis of the Tax Act, the Company has made reasonable estimates of its 2017 impact and due to the federal corporate rate reduction, a re-measurement of deferred tax assets and liabilities resulted in the recording of a charge of approximately $1.1 million. Upon the completion of the 2017 U.S. federal corporate income tax return during the fourth quarter of 2018, we finalized our analysis of the Act and determined no additional adjustments were required.

The effective income tax rate of the Company differs from the federal statutory tax rate due to the following items:

	Year ended December 31,

	2018			2017			2016
Statutory rate		21.00	%		35.00	%		35.00	%
State income taxes, net of federal income tax benefit		0.13	%		(0.08	)%		0.26	%
Stock-based compensation		(1.64	)%		(3.33	)%		(0.50	)%
Deferred rate change		0.01	%		6.21	%		-
Miscellaneous other, net		(0.37	)%		0.52	%		(0.21	)%
Effective tax rate		19.13	%		38.32	%		34.55	%

The decrease in the effective tax rate in 2018 compared to 2017 was primarily due to lowered federal income tax rates as a result of U.S. Tax Reform.

The increase in the effective tax rate in 2017 compared to 2016 was primarily due to the deferred rate change which resulted from lowered federal income tax rates as a result of U.S. Tax Reform and the adoption of ASU No. 2016-09.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts for income tax purposes. The components of deferred income tax assets and liabilities are as follows:

	December 31,

	2018		2017
Deferred revenue	$	-	$	1,344,232
Stock option based compensation		239,492		322,524
Other		74,276		72,950
Net deferred tax asset	$	313,768	$	1,739,706

Qualified stock option compensation, recorded in the Company's consolidated financial statements, is not deductible for tax purposes which increases the Company's effective tax rate. Deferred tax assets, including those associated with non-qualified stock option compensation, are reviewed and adjusted for apportionment and tax law changes in various jurisdictions.

As of December 31, 2018, the Company has no unrecognized tax benefits or related interest and penalties. Management does not believe that there is any tax position which it is reasonably possible that will result in unrecognized tax benefit within the next 12 months.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code denies a federal income tax deduction for certain compensation in excess of $1.0 million per year paid to certain employees of publicly traded companies. Beginning January 1, 2018, on account of the passage and signing of the Tax Reform Act, this limitation will apply to the chief executive officer, chief financial officer, any other named executive officers and anyone who is such a covered person after December 31, 2016. Prior to January 1, 2018, this limitation only applied to the chief executive officer and the three most highly-paid executive officers of the Company (other than the chief executive officer and chief financial officer). In addition, prior to January 1, 2018, compensation that met the requirements of performance-based compensation under Section 162(m) of the Internal Revenue Code was excluded from the deduction limit. Beginning January 1, 2018 (with the exception of certain grandfathered arrangements), a deduction will be denied for any compensation payable to covered employees that exceeds $1.0 million, regardless of whether such compensation is performance-based compensation. To retain highly skilled executives and remain competitive with other employers, the compensation committee may authorize compensation that will not be deductible under Section 162(m) or otherwise.