Annual report pursuant to Section 13 and 15(d)

Note N - Income Taxes

v3.19.1
Note N - Income Taxes
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
NOTE N — INCOME TAXES
 
Due to Milestone Scientific's history of operating losses, a full valuation allowances have been provided for all of Milestone Scientific's deferred tax assets At
December 31, 2018
and
2017,
no
recognition was given to the utilization of the remaining net operating loss carry forwards in each of these periods.
 
Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at
December 31, 2018
and
2017
are as follows: 
 
   
2018
   
2017
 
                 
Allowance for doubtful accounts
  $
3,000
    $
3,000
 
Warranty reserve
   
29,000
     
20,000
 
Impaired Assets
   
435,000
     
5,000
 
Inventory Reserve
   
551,000
     
 
 
Capital Gains
   
-
     
45,000
 
Deferred officers' compensation
   
715,000
     
636,000
 
Depreciation and Amortization
   
345,000
     
181,000
 
Deferred revenue
   
 
     
478,000
 
Net operating loss carryforward
   
16,500,000
     
15,116,000
 
Subtotal
   
18,578,000
     
16,484,000
 
Valuation allowance
   
(18,578,000
)    
(16,484,000
)
Non-current deferred tax asset
  $
-
    $
-
 
 
The deferred tax asset, before valuation allowance, has been calculated on rates anticipated to be effect when the temporary differences reverse.  Accordingly, based on the change in Federal tax rates promulgated in
December 2017,
effective
January 1, 2018,
the Company utilized a Federal rate of
21%
and accordingly existing deferred tax assets upon the tax law act being signed into law on
December 22, 2017,
the Company revalued its deferred tax assets which resulted in a tax provision charge of
$8,677,000,
offset by a corresponding decrease in the valuation allowance. 
 
As of
December 31, 2018,
federal net operating loss carry-forwards are approximately
$65,300,000.
  As of
December 31, 2017,
and Milestone Scientific has federal net operating loss carry-forwards of approximately
$60,000,000,
which is comprised solely of losses attributable Milestone Scientific and its subsidiaries.  Net operating losses will be available to offset future taxable income, if any, through
December 2038.
As of
December 31, 2018,
state net operating losses were approximately
$30,800,000.
As of
December 31, 2017
Milestone, Scientific has state net operating loss carry-forwards of approximately
$26,000,000.
  Net operating losses will be available to offset future taxable income, if any, through
December 2038.  
 
The utilization of Milestone Scientific's net operating losses
may
be subject to a substantial limitation due to the "change of ownership provisions" under Section
382
of the Internal Revenue Code and similar state provisions. Such limitation
may
result in the expiration of the net operating loss carry forwards before their utilization. Milestone Scientific has established a
100%
valuation allowance for all its deferred tax assets due to uncertainty as to their future realization.
 
As of
December 31, 2018,
and
2017,
state tax liability was approximately
$24,000
and
$19,000
respectively. Such expense was recognized in the accompanying consolidated financial statements.
 
Accounting for uncertainties in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure and transition. At
December 31, 2018
and
2017,
we had
no
uncertain tax positions that required recognition in the consolidated financial statements. Milestone Scientific's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Statements of Operations.
No
interest and penalties are present for periods open. Tax returns for the
2015,
2016,
and
2017
 years are subject to audit by federal and state jurisdictions.
 
A reconciliation of the statutory tax rates for the years ended
December 31,
is as follows:   
 
 
   
2018
   
2017
 
Statutory rate
   
21
%    
34
%
State income tax-all states
   
7
%    
6
%
Non-deductible Stock based compensation
   
0
%    
0
%
Deferred provision for effect of change in Federal rate
   
0
%    
164
%
     
28
%    
204
%
Valuation allowance
   
-28
%    
-204
%
Effective tax rate
   
0
%    
0
%