Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

Note I – Income Taxes

 

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act.  The Act makes significant modifications to the provisions of the Internal Revenue Code, including but not limited to, a corporate tax rate decrease from 35% to 21% effective as of January 1, 2018.  The Company’s net deferred tax assets and liabilities have been revalued at the newly enacted U.S. corporate rate in the year of enactment.  The adjustment related to the remeasurement of the deferred tax asset and liability balances, including the revaluation of amounts originally reported in other comprehensive income, is a net benefit of $3.0 million and is included in income as of December 31, 2017.  

Significant components of the provision for income taxes for the years ended December 31, 2017, 2016 and 2015 are as follows (in thousands):

 

 

 

2017

 

 

2016

 

 

2015

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(91

)

 

$

(8

)

 

$

56

 

State

 

 

14

 

 

 

39

 

 

 

101

 

Total Current Provision (Benefit)

 

$

(77

)

 

$

31

 

 

$

157

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(2,739

)

 

$

(1,451

)

 

$

(1,866

)

State

 

 

297

 

 

 

(281

)

 

 

(245

)

Foreign

 

 

(115

)

 

 

-

 

 

 

-

 

Total Deferred Provision (Benefit)

 

$

(2,557

)

 

$

(1,732

)

 

$

(2,111

)

 

A reconciliation of the differences between the effective tax rate and the federal statutory tax rate for the years ended December 31, 2017, 2016 and 2015 is as follows:

 

 

2017

 

 

2016

 

 

2015

 

Federal statutory tax rate

 

 

34.00

%

 

 

34.00

%

 

 

34.00

%

State income taxes, net of federal income tax benefit

 

 

(3.78

)%

 

 

3.43

%

 

 

4.41

%

Non-deductible expenses

 

 

(13.38

)%

 

 

(1.88

)%

 

 

(29.17

)%

Non-deductible stock options and warrants

 

 

(19.76

)%

 

 

(13.37

)%

 

 

(10.24

)%

Prior year adjustments for stock compensation

 

 

 

 

 

 

 

 

(0.26

)%

Deferred revaluation for Tax Cuts and Jobs Act

 

 

88.53

%

 

 

 

 

 

 

 

 

Foreign Tax Rate Differential

 

 

(9.89

)%

 

 

 

 

 

 

 

 

Other, net

 

 

(0.02

%)

 

 

0.73

%

 

 

%

Valuation allowance

 

 

 

 

 

 

 

 

49.49

%

Effective tax rate

 

 

75.70

%

 

 

22.91

%

 

 

48.23

%

 

At December 31, 2017 and 2016, our current and non-current deferred income tax assets and liabilities consisted of the following (in thousands):

 

 

 

2017

 

 

2016

 

Deferred income tax assets (liabilities):

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

170

 

 

$

340

 

Accrued vacation

 

 

943

 

 

 

759

 

Other accruals

 

 

84

 

 

 

84

 

Other

 

 

107

 

 

 

66

 

Net operating loss carry-forwards

 

 

12,282

 

 

 

12,222

 

AMT credit carry-forward

 

 

-

 

 

 

144

 

Nonqualified stock options and warrants

 

 

1,342

 

 

 

1,264

 

Accumulated depreciation and amortization

 

 

(21,235

)

 

 

(29,852

)

Net deferred income tax liabilities

 

$

(6,307

)

 

$

(14,973

)

 

At December 31, 2017, the Company had federal net operating loss carry forwards of approximately $50.2 million and state net operating loss carry forwards of approximately $22.6 million. The Company adopted ASU 2016-09 as of January 1, 2017.  Adoption requires a modified retrospective transition whereby the cumulative-effect is an adjustment to equity as of the beginning of the period.  This resulted in an adjustment to the deferred tax assets related to net operating loss carryforwards and equity of $6.4 million.  Assuming our net operating loss carry forwards are not disallowed because of certain “change in control” provisions of the Internal Revenue Code, these net operating loss carry forwards expire in various years beginning in the year ending December 31, 2029.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.  We previously established a valuation allowance to fully reserve our net deferred income tax assets as such assets did not meet the more likely than not recognition standard established by ASC Topic 740. As of December 31, 2015, due to an increase of deferred tax liabilities resulting from the acquisition of Clarient, management has determined that sufficient positive evidence exists to conclude that it is more likely than not that additional deferred taxes are realizable and therefore reduced the valuation allowance to zero.  Our valuation allowance decreased by approximately $0, $0 and $2,240,800 during the years ended December 31, 2017, 2016 and 2015, respectively.

We file income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment. For federal and state purposes, we have open tax years ending December 31, 2009 to December 31, 2017.  We are not currently subject to any ongoing income tax examinations.

We have examined our current and past tax positions taken, and have concluded that it is more likely than not these tax positions will be sustained in the event of an examination and that there would be no material impact to our effective tax rate. As of December 31, 2017 we had no unrecognized tax benefits. In the event interest or penalties will be accrued, our policy is to include these amounts related to unrecognized tax benefits in income tax expense. As of December 31, 2017, we had no accrued interest or penalties related to uncertain tax positions.