v3.25.4
Note 10 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

10.

Income Taxes

 

President Trump signed into laws the One Big Beautiful Bill Act “OBBBA” on July 4, 2025. This bill included various tax provisions, many of which are applicable for most, if not all, of the 2025 tax year. Most impactful for the Company are changes related to section 174 for R&D expenditures and section 168 for bonus depreciation.

 

The OBBBA enacted new Section 174A, which permanently allows taxpayers to fully expense domestic research or experimental expenditures paid or incurred in taxable years beginning after December 31, 2024. Foreign R&D expenditures must still be capitalized and amortized over 15 years. Additionally, the new rules provide options to account for any remaining unamortized domestic R&D expenditures paid or incurred in the taxable years beginning after December 31, 2021 and before January 1, 2025. Taxpayers may continue to amortize such unamortized amounts over the remaining five-year period; alternatively, they may elect to deduct any remaining unamortized domestic expenditures either entirely in the first tax year beginning after December 31, 2024, or ratably over two taxable years. The Company is electing to deduct these remaining unamortized costs entirely in 2025.

 

The OBBBA also permanently restored 100% bonus depreciation under Section 168(k) for qualified property acquired and placed in service after January 19, 2025. This reverses the phasedown schedule enacted under the Tax Cuts and Jobs Act (“TCJA”), which would have reduced bonus depreciation to 40% for property placed into service in 2025 and eliminated it entirely by 2027. The Company is claiming 40% bonus on any 2025 assets placed in service before January 19 and 100% bonus on all remaining assets placed in service through the remainder of the year.

 

The provision (benefit) for income taxes consisted of the following:

 

   

For the Years Ended December 31,

 
   

2025

    

2024

  

Current

                

Federal

   $ 633,000     $ 748,000  

State

     232,000       175,000  

Foreign

     97,000       107,000  

Deferred

                

Federal

     127,000       40,000  

State

     49,000       21,000  
                 

Provision for income taxes

   $ 1,138,000     $ 1,091,000  

 

Deferred income tax assets (liabilities) consisted of the following:

 

   

December 31,

  
   

2025

    

2024

  

Temporary differences:

                

Property and equipment

   $ (1,361,000 )   $ (1,234,000 )

Intangible assets

     24,000       158,000  

Inventory reserve

     81,000       87,000  

Accrued expenses and inventory

     475,000       392,000  

Right of use of asset

     (1,633,000 )     (1,872,000 )

Foreign exchange

     25,000       29,000  

Lease liability

     1,655,000       1,885,000  

AMT/foreign tax credits

     233,000       188,000  

State income taxes

     (178,000 )     (136,000 )
                 

Net deferred income tax liabilities

   $ (679,000 )   $ (503,000 )

 

The provision for income taxes differs from the amount that would be obtained by applying the U.S. statutory rate to income before income taxes as a result of the following:

 

   

For the Years Ended December 31,

  
   

2025

    

2024

  

Income taxes based on U.S.

                                

statutory rate of 21%

   $ 980,000       21.0 %   $ 1,054,000       21.0 %

Non-deductible meals & entertainment

     10,000       0.2       9,000       0.2  

FDII deduction

     (4,000 )     -0.1       (5,000 )     -0.1  

Foreign taxes

     (80,000 )     -1.7       (136,000 )     -2.7  

State taxes

     250,000       5.4       200,000       4.0  

Stock compensation

     2,000       0.0       (33,000 )     -0.7  

Other

     (20,000 )     -0.4       2,000       0.0  
                                 

Provision for income taxes

   $ 1,138,000       24.4 %   $ 1,091,000       21.7 %

 

Cash paid for taxes:

 

 

   

For the Years Ended December 31,

  
   

2025

    

2024

  

Federal

   $ 494,000     $ 1,119,000  

State

     257,000       190,000  

Foreign

     139,000       126,000  

Total taxes paid, net of refunds

   $ 890,000     $ 1,435,000  

 

Foreign taxes paid were all paid Canada. In 2025, taxes paid to Illinois was $79,000, which exceeded 5% of total income taxes paid.