INCOME TAXES

6 Months Ended

Jun. 30, 2018

INCOME TAXES 

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA"). The TCJA makes broad and complex changes to the U.S. tax code. On the same date, the SEC staff issued Staff Accounting Bulletin ("SAB") 118 which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. Therefore, in quarter one of 2018, the Company revalued its deferred tax liabilities at the new revised federal corporate tax rate of 21%, reducing them by about $120,000 in total and provided the same in income tax savings.

The TCJA contains a number of additional provisions which may impact the Company in future years. However, since the TCJA was recently finalized, and ongoing guidance and accounting interpretation is expected over the next 12 months, the Company has not yet elected any changes to accounting policies and the Company’s analysis is ongoing. Provisional accounting impacts may change in future reporting periods until the accounting analysis is finalized, which will occur no later than one year from the date the TCJA was enacted.

During the first six months of 2018, the Company increased its deferred tax liabilities by approximately $21,000, primarily for adjustments related to the accelerated deductibility of various Section 179 properties. The Company also recorded a deferred tax asset of approximately $5,000 for expected tax savings from the unrealized loss on investments.

The estimated federal income tax expense payable for the six months ended June 30, 2018, was $28,713. The estimated local income tax expense payable for the six months ended June 30, 2018, was $2,628. Our estimates will be revised in future quarters if circumstances warrant such revisions. The Company adjusted its income tax accrual accounts accordingly.

During the first six months of 2017, the Company decreased its deferred tax liabilities by approximately $5,000 (from $362,753 to $357,659). This decrease was the net result of an increase of approximately $9,000 for adjustments related to the accelerated deductibility of various Section 179 properties offset by a decrease of approximately $14,000 for the reversal of deductible items taken in 2016.

The Company follows provisions of uncertain tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. Based on management’s evaluation, the Company has no position at June 30, 2018, or December 31, 2017, for which there is uncertainty about deductibility. The Company is no longer subject to U.S. Federal and state income tax examinations by taxing authorities for years before December 31, 2015.

OURPETS CO 10-Q