11. INCOME TAXES
The Company did not recognize a tax provision for the years ended December 31, 2016 and 2015.
Following are the components of deferred tax assets and allowances at December 31, 2016 and 2014:
|
| 2016 | 2015 |
| Deferred tax assets arising from: |
|
|
| Capitalized exploration and development costs | $ 50,000 | $ 102,000 |
| Unrecovered promotional and exploratory costs | 153,000 | 161,000 |
| Accrued remediation costs | 53,000 | 50,000 |
| Share based compensation | 381,000 | 399,000 |
| Net operating loss carryforwards | 16,122,000 | 10,319,000 |
| Total deferred tax assets | 16,759,000 | 11,031,000 |
| Less valuation allowance | (16,759,000) | (11,031,000) |
| Net deferred tax assets | $ 0 | $ 0 |
Management has determined that it is more likely than not that the Company will not realize the benefit of its deferred tax assets. Therefore a valuation allowance equal to 100% of deferred tax asset has been recognized. The deferred tax assets were calculated based on an effective tax rate of 41.1%.
During the year ended December 31, 2016, the Company filed amended tax returns to correct allocations of Joint Venture losses reported to the Company for the years ending 2012 through 2015, resulting in an increase in losses reported on its federal and state tax returns of $7.5 million and $6.8 million, respectively.
At December 31, 2016, the Company had federal and state tax-basis net operating loss carryforwards totaling $37.0 million and $35.5 million, respectively, compared with federal and state tax-basis net operating loss carryforwards totaling $35.5 million and $34.6 million for the period ended December 31, 2015. These net operating losses will expire in various amounts from 2019 through 2036.
|
| 2016 |
| 2015 |
|
| Federal income tax expense (benefit) based on statutory rate | $ (249,000) | 34.0% | $ 17,000 | 34.0% |
| State income tax expense (benefit), net of federal taxes | (52,000) | 7.0% | 2,000 | 3.1% |
| Nondeductible meals and entertainment | - | -% | 1,000 | 0.1% |
| Revision of NOL estimates, state apportionment factors and state effective tax rates | (5,427,000) | 740.1% | 64,000 | 128.0% |
| Increase (decrease) in valuation allowance | 5,728,000 | (781.1)% | (84,000) | (165.2)% |
| Total taxes on income (loss) | $ 0 | -% | $ 0 | -% |
The Company has no unrecognized tax benefits as of December 31, 2016 or 2015. Management has reviewed the Company’s tax positions and believes that it is more likely than not all positions would be sustained in an audit. The Company has not provided for any interest or penalties associated with any uncertain tax positions. If interest and penalties were to be assessed, the Company’s policy is to deduct the amounts as interest expense and other expense. Currently, tax years from 2013 through 2016 remain open for examination by tax authorities. Net operating losses prior to 2013 could be adjusted during an examination of open years.