Components of the income tax expense are as follows for the years ended:

 

		September 30,				September 30,				September 30,
		2019				2018				2017
Current:
Federal		$	1,260,552			$	1,472,512			$	1,627,125
State			103,130				120,034				78,552
Current income tax expense			1,363,682				1,592,546				1,705,677
Deferred:
Federal			(38,534	)			(463,798	)			8,680
State			35,289				124,657				23,617
Deferred income tax expense			(3,245	)			(339,141	)			32,297
Income tax expense		$	1,360,437			$	1,253,405			$	1,737,974

 

The following is a reconciliation of the federal statutory income tax rate to the effective tax rate as a percent of pre-tax income for the following years ended:

 

		September 30,				September 30,				September 30,
		2019				2018				2017
Federal statutory rate			21	%			24	%			34	%
Federal rate change			-				(5	%)			-
State income taxes			2	%			2	%			1	%
Permanent differences			-				-				(1	%)
Change in valuation allowance			(1	%)			(3	%)			(4	%)
Expiration and utilization of state NOL’s			2	%			4	%			3	%
Research and development credits			(2	%)			(1	%)			(1	%)
Excess tax expense (benefits) from stock-based compensation			1	%			2	%			(1	%)
Tax rate			23	%			23	%			31	%

 

The federal statutory rate for the year ended is a blended rate due to the change in federal statutory rates resulting from the Tax Cuts and Jobs Act which was signed into law on

 

As of the current income tax payable was approximately and as of the current income tax payable was approximately Current income tax payable amounts are included in Accrued Expenses in the Company’s balance sheets.

 

As of and the Company had U.S. federal net operating loss (“NOL”) carry-forwards and approximately and state NOLs, respectively. The state NOL carry forward amounts expire in fiscal years through if utilized. In addition, as of the Company has Minnesota research and development and alternative minimum tax credits of and respectively. The Company has recorded a valuation allowance on these research and development related deferred tax assets as the Company believes it is more likely than they will be utilized before they begin to expire in fiscal year

 

Significant components of deferred income tax assets and liabilities are as follows at:

		September 30,				September 30,
		2019				2018
Deferred income tax assets (liabilities):
Intangibles		$	(75,190	)		$	(70,467	)
Property and equipment depreciation			(521,586	)			(552,119	)
Net operating loss carry forwards and credits			377,505				464,274
Stock-based compensation			114,118				151,558
Inventories			350,197				400,111
Prepaid expenses			(63,252	)			(60,806	)
Accrued expenses and reserves			371,414				250,787
Goodwill			(607,882	)			(583,415	)
Gross deferred tax liability			(54,676	)			(77	)
Valuation allowance			(47,014	)			(104,858	)
Net deferred tax liability		$	(101,690	)		$	(104,935	)

 

Realization of net operating loss carryforwards and other deferred tax temporary differences are contingent upon future taxable earnings. The Company’s deferred tax assets were reviewed for expected utilization by assessing the available positive and negative factors surrounding their recoverability.

 

As of the Company’s remaining valuation allowance of approximately related to state net operating loss carry forwards. During the quarter of the Company reversed approximately of its valuation allowance. This consisted of decreasing the valuation allowance for the expiration and utilization of state net operating losses in of approximately and increasing the valuation allowance by approximately for future expected NOL utilization based on updated profitability estimates and changes to the loss utilization rules. The remaining valuation allowance balance as of of approximately relates entirely to state net operating loss carry forwards we do expect to utilize. The Company will continue to assess the assumptions used to determine the amount of our valuation allowance and adjust the valuation allowance in future periods based on changes in assumptions of estimated future income and other factors. If the valuation allowance is reduced, we would record an income tax benefit in the period the valuation allowance is reduced. If the valuation allowance is increased, we would record additional income tax expense.

 

The valuation allowance activity for the years ended and is as follows:

 

Year Ended		Balance at Beginning of Year				Income Tax Expense (Benefit)				Reversal for State NOL Expiration and Utilization				Balance at End of Year
September 30, 2019		$	104,858			$	10,448			$	(68,292	)		$	47,014
September 30, 2018			159,154				79,377				(133,673	)			104,858
September 30, 2017			322,404				(32,154	)			(131,096	)			159,154

 

The Company completed an Internal Revenue Code Section analysis of the loss carry forwards in and determined then that all of the Company’s loss carry forwards are utilizable and restricted under Section The Company has updated its Section analysis subsequent to and does believe there have been any events subsequent to that would impact the analysis.

 

The Company is required to recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than sustain the position following an audit. For tax positions meeting the more likely than threshold, the amount recognized in the financial statements is the largest benefit that has a greater than percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applies the interpretation to all tax positions for which the statute of limitations remained open. The Company had liability for unrecognized tax benefits and did recognize any interest or penalties during the years ended or

 

The Company is subject to income taxes in the U.S. federal jurisdiction, and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is longer subject to U.S. federal, state and local, income tax examinations by tax authorities for fiscal years ending prior to We are generally subject to U.S. federal and state tax examinations for all tax years since due to our net operating loss carryforwards and the utilization of the carryforwards in years still open under statute. During the year ended the Company was examined by the U.S. Internal Revenue Service for fiscal year This examination resulted in adjustments. The Company changed its fiscal year end in from to