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STEREOTAXIS, INC. filed this Form 10-K on 03/15/2019
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Included in permanent differences between book and tax in the above table are the impacts of the non-deductible mark-to-market activity associated with convertible debt and warrants as well as permanent differences such as nondeductible meals and entertainment and stock compensation shortfalls. The deferred state rate adjustments are a result of changes in apportionment and various state rate law changes. The deferred tax adjustments are primarily attributable to the write-off of deferred tax assets associated with the unexercised stock compensation awards that expired during the current year.


The components of the deferred tax asset are as follows:


   December 31, 
   2018   2017 
Current accruals  $1,746,094   $1,718,808 
Deferred revenue   605    30,648 
Depreciation and amortization   1,279,973    1,311,718 
Deferred compensation   471,143    633,303 
Net operating loss carryovers   22,933,668    22,359,693 
Deferred tax assets   26,431,483    26,054,170 
Valuation allowance   (26,359,083)   (25,955,759)
Net deferred tax assets before deferred tax liabilities   72,400    98,411 
Accounting method changes       (98,411)
Capitalized compensation costs   (72,400)    
Net deferred tax assets  $   $ 


On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted, which made significant changes to the Internal Revenue Code (“IRC” or “Code”). The TCJA lowered the U.S. federal income tax rate to 21%, beginning on January 1, 2018. Additionally, among other changes, the TCJA imposes a one-time transition tax on the mandatory repatriation of unremitted foreign earnings, as well as a minimum tax on global intangible low-taxed income (“GILTI”) of foreign subsidiaries. As required by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, we finalized our accounting analysis with the filing of our 2017 tax returns. We have recorded the impacts of the TCJA in our effective tax rate and have elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI using the period cost method. The Company will continue to monitor the forthcoming regulations and additional guidance of the GILTI, FDII, and BEAT provisions under the TCJA, which are complex and subject to continuing regulatory interpretation by the IRS.


Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Following significant ownership changes during 2013, the Company initiated a review of the availability of its U.S. net operating loss carryforwards. As a result of this review, it was determined that a large portion of the Company’s net operating loss carryovers would expire unused due to the limitation under IRC Section 382. The Company reduced the net operating loss carryover and corresponding valuation allowance as a result of these limitations as reflected in the net operating loss carryovers in the table above. The remaining net operating loss carryforwards following the ownership change have been assigned a full valuation allowance against all deferred tax assets.


In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, and projections for future periods over which the deferred tax assets are deductible, the Company determined that a 100% valuation allowance of deferred tax assets was appropriate.


As of December 31, 2018, we had gross federal net operating loss carryforwards of approximately $100.3 million. The federal net operating loss carryforwards reflect accumulated book losses reduced for the 2013 IRC Section 382 ownership change limitation of $284.7 million and approximately $92.0 million of book/tax differences and expiration of unused carryforwards. The federal net operating loss carryforwards generated prior to the 2018 tax year will expire between 2030 and 2037. The federal net operating loss generated during 2018 will be carried forward indefinitely as a result to changes in the law following TCJA. As of December 31, 2018, we had state net operating loss deferred tax assets of approximately $1.9 million which will expire at various dates between 2019 and 2037 if not utilized.


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