3. Income Taxes
Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company's deferred tax assets consist entirely of the benefit from net operating loss (NOL) carryforwards. The net operating loss carryforwards, if not used, will expire in various years through 2036, and are severely restricted as per the Internal Revenue code if there is a change in ownership. The Company's deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carry forwards. Net operating loss carryforwards may be further limited by other provisions of the tax laws.
The Company's deferred tax assets, valuation allowance, and change in valuation allowance are as follows:
| Period Ending | Estimated NOL Carry-forward | NOL Expires | Potential Tax Benefit from NOL | Valuation Allowance | Change in Valuation Allowance |
Net Tax Benefit | ||||||
| December 31, 2016 | $300,000 | Various | $67,950 | $(67,950) | $-- | $-- | ||||||
| December 31, 2015 | $300,000 | Various | $67,950 | $(67,950) | $-- | $-- |
Income taxes at the statutory rate are reconciled to the Company's actual income taxes as follows:
| Income tax benefit at statutory rate resulting from net operating loss carryforward | (15.00%) | |
| State tax (benefit) net of federal benefit | (7.65%) | |
| Deferred income tax valuation allowance | 22.65% | |
| Actual tax rate | 0% |
The Company also is obligated to pay franchise taxes and related fees to the State of California. At December 31, 2016, accrued and unpaid franchise taxes and related fees were -0- as the Company had paid in full and was restored to good standing.