Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes

The income tax provision (benefit) from operations included in the consolidated statements of income consists of the following:

	Years Ended
	December 31,		December 31,
	2018		2017
	($000’s omitted)
Current:
Federal	$	639	$	675
State		2		1
		641		676
Deferred:
Federal		96		82
State		-		-
		96		82
	$	737	$	758

The reconciliation of the federal statutory income tax rate to the Company’s effective tax rate based upon the total income tax provision from operations is as follows:

	Years Ended
	December 31,			December 31,
	2018			2017
Federal statutory rate		21.0	%		34.0	%
Business credits		-0.6	%		-4.8	%
ESOP dividend		-0.4	%		-1.4	%
Stock compensation		-0.4	%		-1.9	%
Domestic production activities deduction		-0.4	%		-2.4	%
Revaluation of deferred taxes for federal tax rate change		0.0	%		12.6	%
Foreign-derived intangible income deduction		-1.8	%		0.0	%
Other		0.0	%		0.4	%
		17.4	%		36.5	%

At December 31, 2018 and 2017, the deferred tax assets (liabilities) were comprised of the following:

	Years Ended
	December 31,			December 31,
	2018			2017
	($000’s omitted)
Deferred Tax Assets:
Inventories	$	417		$	406
Accrued employees compensation and benefits costs		478			430
Accrued arbitration award and related liability		234			268
Net operating loss and credit carryforwards		248			269
Bad debt reserve		37			33
Warranty reserve		90			8
Other		-			33
Minimum pension liability		-			9
Total deferred tax assets		1,504			1,456
Valuation allowance		(248	)		(279	)
Net deferred tax asset		1,256			1,177
Deferred tax liabilities:
Prepaid expenses		(28	)		-
Property, plant and equipment		(910	)		(768	)
Other		(14	)		-
Minimum pension liability		(9	)		-
Total deferred tax liabilities		(961	)		(768	)
Net deferred tax asset	$	295		$	409

In assessing the ability of the Company to realize the benefit of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based upon the level of historical taxable income, the opportunity for net operating loss carrybacks, and projections for future taxable income over the periods which deferred tax assets are deductible, management believes it is more likely than not the Company will generate sufficient taxable income to realize the benefits of these deductible differences at December 31, 2018, except for a valuation allowance of $248,000 ($279,000 – 2017) related to certain state net operating loss carryforwards, state tax credit carryforwards and other state net deferred tax assets. At December 31, 2018, the Company has net operating loss carryforwards with full valuation allowances from Pennsylvania of approximately $1,805,000 ($2,240,000 – 2017), which begin to expire in 2019, and Arkansas of approximately $31,000 ($31,000 – 2017), which begin to expire in 2019, respectively. The Company also has a New York state tax credit carryforward at December 31, 2018 of approximately $131,000 ($115,000 – 2017), which begins to expire in 2023.

There are no uncertain tax positions or unrecognized tax benefits for 2018 and 2017. The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities. The 2015 through 2017 Federal and state tax returns remain subject to examination.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The legislation significantly changed U.S. tax law by, among other things, changing rules related to usage and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017, implementing a territorial tax system and imposing a transition toll tax on deemed repatriated earnings of foreign subsidiaries and lowering corporate income tax rates. The Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a 21% rate, effective January 1, 2018.