9. Income Taxes
The Company did not recognize a tax provision or benefit for the years ended December 31, 2017 and 2016 due to ongoing net losses and a valuation allowance. At December 31, 2017 and 2016, the Company had net deferred tax assets which were fully reserved by valuation allowances due to the likelihood of expiration of these deferred tax benefits.
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Act") resulting in significant modifications to existing law. The Company completed the accounting for the effects of the Act during the quarter ended December 31, 2017. The Company did not incur any income tax benefit or provision for the year ended December 31, 2017 as a result of the changes to tax laws and tax rates under the Act. The Company’s net deferred tax asset was reduced by $882,400 during the year ended December 31, 2017, which consisted primarily of the re-measurement of federal deferred tax assets and liabilities from the previous rate of 35% to the newly enacted rate of 21%.
At December 31, 2017 and 2016, net deferred tax assets were calculated based on an expected blended future tax rate of 27% and 38%, respectively, for federal and Idaho state purposes. Significant components of net deferred tax assets at December 31, 2017 and 2016 are as follows:
|
| 2017 | 2016 |
| Deferred tax assets: |
|
|
| Net operating loss carryforwards | $ 1,836,000 | $ 2,500,000 |
| Share-based compensation | 59,000 | 64,500 |
| Deferred salaries | 232,600 | 216,000 |
| Exploration costs | 67,000 | 116,800 |
|
| 2,194,600 | 2,897,300 |
| Deferred tax liabilities: |
|
|
| Investment in OGT LLC | (146,000) | (250,000) |
| Net deferred tax assets | 2,048,600 | 2,647,300 |
| Less valuation allowance | (2,048,600) | (2,647,300) |
| Net deferred tax asset | $ 0 | $ 0 |
As of December 31, 2017, the Company has approximately $6.9 million of federal and state net operating loss carryforwards that expire in 2028 through 2036.
The income tax benefit shown in the financial statements for the years ended December 31, 2017 and 2016 differs from the federal statutory rate as follows:
|
| 2017 | 2016 | ||
| (Provision) benefit at statutory rates | 249,000 | 35.0% | $ 363,400 | 35.0% |
| State taxes | 34,100 | 4.8% | 31,200 | 3.0% |
| Miscellaneous permanent differences | 600 | 0.1% | 4,200 | 0.4% |
| Impact of change in tax rates | (882,400) | (124.2) | - | - |
|
| 598,700 | 84.2 % | (398,800) | (38.4) |
| Total | $ 0 | - % | $ 0 | - % |
The Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns and found no positions that would require a liability for uncertain income tax benefits to be recognized. The Company is subject to possible tax examinations for the years 2013 through 2017. Prior year tax attributes could be adjusted by taxing authorities. If applicable, the Company will deduct interest and penalties as interest expense on the financial statements.