Entity information:

7. INCOME TAXES

 

The Company accounts for income taxes pursuant to ASC Topic 740-10, "Accounting for Income Taxes". ASC Topic 740-10 utilizes the liability method of computing deferred income taxes.

 

Income tax differed from the amounts computed by applying an effective United States federal income tax rate of 34% to pretax income in 2016, 2015 and 2014 as a result of the following:

 

 

  2016 2015 2014
Computed expected tax expense (benefit)  $    (671,000)  $  (2,735,000)  $   1,290,000
       
Miscellaneous timing differences      
related to book and tax depletion      
differences and the expensing of      
intangible drilling costs         380,000      1,978,000        (764,000)
NOL Carryforward         118,000                  -                     -   
Correction of prior year estimate                  -           (171,000)                  -   
       
Expected Federal income tax expense (benefit)  $    (173,000)  $    (928,000)  $     526,000
       
       
Income tax expense (benefit) for the years ended December 31, 2016, 2015 and 2014 consisted of the following:
       
  2016 2015 2014
Federal income taxes (benefit)  $    (173,000)  $    (928,000)  $     526,000
State income taxes                  -                     -                     -   
Current income tax provision (benefit)  $    (173,000)  $    (928,000)  $     526,000

 

Deferred income taxes reflect the effects of temporary differences between the tax bases of assets and liabilities and the reported amounts of those assets and liabilities for financial reporting purposes. Deferred income taxes also reflect the value of investment tax credits and an offsetting valuation allowance. The Company's total deferred tax assets and corresponding valuation allowance at December 31, 2016 and 2015 consisted of the following:

 

   December 31,  
  2016 2015
Deferred tax assets    
Depletion and amortization      1,137,000      1,186,000
Expired leasehold         250,000         190,000
Other, net             7,000             7,000
Total deferred tax assets      1,394,000      1,383,000
     
Deferred tax liabilities    
Intangible drilling costs     (1,323,000)     (1,801,000)
Depreciation          (89,000)          (72,000)
Total deferred tax liability     (1,412,000)     (1,873,000)
Net deferred income tax payable  $      (18,000)  $    (490,000)