The Company files a consolidated Federal Income Tax Return. As of June 30, 2017 the Company has a NOL carryforward of approximately $5,600,000. Under IRC Code Sec 382 use of NOL carryforwards may be limited due to CTR acquisition by Freestone.
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under ASC Topic 740, Income Taxes, to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, non-deductible stock for services and environmental reserves based on the income taxes expected to be payable in future years. Deferred tax benefits related to the NOL carryforward of approximated $1,905,000 are fully reserved by a valuation allowance due to the uncertainly of their realization.
FDEP has a calendar tax year and files a separate Form 1065 partnership return with income and loss being allocated based on distributions and contributions under the partnership agreement. Freestone share of the year ended December 31, 2016 loss is included in the consolidated June 30, 2016 return.
The Company has no tax positions at June 30, 2017 and 2016 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Freestone’s tax returns for the years ended June 30, 2017, 2016, 2015 and 2014 and CTR’s tax returns for the periods ended June 30, 2015 and December 31, 2014 are open for examination under Federal Statute of Limitations.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had no accruals for interest and penalties since inception.
A reconciliation of the provision for income tax expense with the expected income tax computed by applying the federal statutory income tax to income before provision for income taxes is as follows:
| Year Ended June 30, 2017 | Year Ended June 30, 2016 | |||||||
| Income Tax (benefit) computed at Federal statutory tax rate of 34% | $ | (498,000 | ) | $ | (809,000 | ) | ||
| Loss allocated to non-controlling interest | 108,000 | 143,000 | ||||||
| Non-Deductible Stock Compensation Expense | 10,000 | 290,000 | ||||||
| Non-Deductible Travel & Entertainment | — | 8,000 | ||||||
| Change in valuation allowance | 380,000 | 368,000 | ||||||
| Provision For Income Taxes | $ | — | $ | — |