Note 14 — Income Taxes

The income tax provisions as of September 30, 2018 and October 1, 2017 include the following:

During the twelve months ended September 30, 2018, the Company recognized a $1.6 million change to our deferred tax asset and corresponding valuation account allowance primarily related to the change in statutory tax rate from 34% to 21% which was effective as of December 22, 2017.

The income tax provision for Optex Systems as of September 30, 2018 differs from those computed using the statutory federal tax rate in the respective years due to the following permanent differences:

Deferred income taxes recorded in the balance sheets result from differences between financial statement and tax reporting of income and deductions. A summary of the composition of the deferred income tax assets (liabilities) follows:

The Company has a net loss carryforward of $6.9 million as of September 30, 2018 as compared to a net loss carryforward of $6.5 million as of October 1, 2017. Due to an IRS section 382 change in control limitation which was effective during the fiscal year ended 2017, it is anticipated that the company may only realize $3.1 million of the current net operating loss carryforward for a net tax benefit of $0.7 million over the next nineteen years.

During the twelve months ended September 30, 2018, the Company recognized a $1.6 million change in the deferred tax assets and corresponding deferred tax asset valuation as result of a change in statutory tax rates from 34% to 21% which was effective as of December 22, 2017 and an additional $0.1 million for current year changes in the net operating loss carryforward and other deferred tax assets related to the current year period activity. As of September 30, 2018 management assessed the recoverability of deferred tax assets and determined due to historical loss conditions and the downturn in the defense budget spending, that the balance of deferred tax assets may not be realized. As of September 30, 2018 Optex Systems Inc. has a deferred tax asset valuation allowance of ($2.9) million against a deferred tax asset of $2.9 million.

As the result of the application of the FASB ASC 740-10, Optex Systems Holdings has no unrecognized tax benefits. By statute, the tax years ended in September 30, 2018, October 1, 2017 and October 2, 2016 are open to examination by the major taxing jurisdictions to which the Optex Systems Holdings is subject.

During the twelve months ended September 30, 2018 the Company paid $144 thousand in income taxes, and the outstanding accrued federal income tax liability related to the fiscal year 2018 tax year is $22 thousand. There were no income taxes paid during the fiscal year ended October 1, 2017 or outstanding tax liabilities accrued as of the fiscal year 2017 period end.