6.	Income Taxes

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

	2016			2015
	($000’s omitted)
Current:	$	691		$	387
Federal		(1	)		3
State		690			390

Deferred:		27			1,741
Federal		-			-
State		27			1,741
	$	717		$	2,131

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:

	2016			2015
Federal statutory rate		34.0	%		34.0	%
Business credits		(2.2	%)		(1.8	%)
ESOP dividend		(1.2	%)		(0.4	%)
Domestic production activities deduction		(1.9	%)		(0.2	%)
Other		0.3	%		0.1	%
Effective tax rate		29.0	%		31.7	%

At December 31, 2016 and 2015, the deferred tax assets (liabilities) were comprised of the following:

	2016			2015
	($000s omitted)
Deferred tax assets:
Inventories	$	604		$	665
Accrued employees compensation and benefits costs		696			612
Accrued arbitration award and related liability		160			160
Net operating loss and credit carryforwards		244			388
Other		49			52
Minimum pension liability		10			2
Total deferred tax assets		1,763			1,879
Valuation allowance		(253	)		(397	)
Net deferred tax asset		1,510			1,482
Deferred tax liabilities:
Property, plant and equipment		(1,019	)		(972	)
Total deferred tax liabilities		(1,019	)		(972	)
Net deferred tax asset	$	491		$	510

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, 2016, except for a valuation allowance of $253,000 ($397,000 – 2015) related to certain state net operating loss carryforwards, state tax credit carryforwards and other state net deferred tax assets. At December 31, 2016, the Company has net operating loss carryforwards with full valuation allowances from Pennsylvania of approximately $2,240,000 ($2,240,000 – 2015), which begin to expire in 2019, and Arkansas of approximately $839,000 ($2,530,000 – 2015), which begin to expire in 2018, respectively. The Company also has a New York state tax credit carryforward at December 31, 2016 of approximately $97,000 ($217,000 – 2015), which begins to expire in 2024.

There are no uncertain tax positions or unrecognized tax benefits for 2016 and 2015. The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities. The 2013 through 2015 Federal and state tax returns remain subject to examination.