Entity information:
Note 8.  Income Taxes 
 
The provision for income taxes consists of the following components:
 
 
 
As of December 31,
 
 
 
2016
 
2015
 
Current
 
$
-
 
$
-
 
Deferred
 
 
-
 
 
-
 
 
 
$
-
 
$
-
 
 
The components of deferred income tax assets and liabilities are as follows:
 
 
 
As of December 31,
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Long-term deferred tax assets:
 
 
 
 
 
 
 
Stock compensation benefit $
 
 
219,778
 
$
219,778
 
Net operating loss carryforward
 
 
2,618,411
 
 
2,316,729
 
Total long-term deferred tax assets
 
 
2,838,189
 
 
2,536,507
 
Valuation allowance
 
 
(2,838,189)
 
 
(2,536,507)
 
 
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
Long-term deferred tax liabilities:
 
 
 
 
 
 
 
Intangible assets
 
 
-
 
 
-
 
Property and equipment
 
 
-
 
 
-
 
Total long-term deferred tax liabilities
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
Net deferred tax assets $
 
 
-
 
$
-
 
 
The Company’s federal net operating loss (“NOL”) carryforward balance as of December 31, 2016 was $7,277,408, expiring between 2018 and 2036.
 
A schedule of the NOLs is as follows:
 
 
 
Net operating
 
 
 
Tax Year
 
loss
 
NOL Expiration
 
1998
 
$
184,360
 
 
2018
 
1999
 
 
187,920
 
 
2019
 
2000
 
 
25,095
 
 
2020
 
2001
 
 
104,154
 
 
2021
 
2002
 
 
15,076
 
 
2022
 
2003
 
 
96,977
 
 
2023
 
2004
 
 
78,293
 
 
2024
 
2005
 
 
70,824
 
 
2025
 
2006
 
 
48,526
 
 
2026
 
2007
 
 
180,521
 
 
2027
 
2008
 
 
876,017
 
 
2028
 
2009
 
 
414,784
 
 
2029
 
2010
 
 
706,174
 
 
2030
 
2011
 
 
836,536
 
 
2031
 
2012
 
 
728,812
 
 
2032
 
2013
 
 
668,632
 
 
2033
 
2014
 
 
573,882
 
 
2034
 
2015
 
 
703,263
 
 
2035
 
2016
 
 
777,562
 
 
2036
 
 
 
$
7,277,408
 
 
 
 
 
The Company’s net deferred tax assets before valuation allowance as of December 31, 2016 was $2,838,189, most of which relates to net operating losses that expire from 2018 to 2036. The Company recorded an operating loss for the year and has a history of operating losses. After assessing the realization of the net deferred tax assets, we have recorded a valuation allowance of 100% of the value of the net deferred tax assets as we believe it more likely than not that the Company will not realize operating profits and taxable income so as to utilize all of the net operating losses in the future. During the year ended December 31, 2016, the Company recorded a valuation allowance of $301,682.
 
The Company is subject to income taxes in the U.S. federal jurisdiction and Florida state jurisdiction. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by tax authorities for the years before 2013.
 
The income tax provision differs from the expense that would result from applying statutory rates to income before income taxes principally because of permanent differences and the release of the valuation allowance on net deferred tax assets for which realization is certain. The effective tax rates for 2016 and 2015 were computed by applying the federal and state statutory corporate tax rates as follows:
 
 
 
Year ended
December 31,
 
 
 
2016
 
2015
 
 
 
 
 
 
 
Statutory Federal income tax rate
 
 
34.00
%
 
34.00
%
State income taxes
 
 
5.50
%
 
1.00
%
Non-deductible compensation
 
 
-12.00
%
 
-12.00
%
Less valuation allowance
 
 
-27.50
%
 
-23.00
%
Loss of expiring NOLs
 
 
0.00
%
 
0.00
%
Other
 
 
0.00
%
 
0.00
%
 
 
 
0.00
%
 
0.00
%
 
The Company adopted the provisions of ASC 740, previously FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, on January 1, 2007. Previously the Company has accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5, Accounting for Contingencies.
 
The Company recognizes the financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than–not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date the Company applied ASC 740 to all tax positions for which the statute of limitations remained open. As a result of the implementation of ASC 740, the Company did not recognize a material increase in the liability for uncertain tax positions.
 
In adopting ASC 740-10, the Company elected to classify interest and penalties related to unrecognized tax benefits as income tax expenses. The Company has no accrued interest and penalties as of the years ended December 31, 2016 and 2015.
 
A reconciliation of beginning and ending amount of unrecognized tax benefits is as follows:
 
Balance at January 1, 2015
 
$
11,400
 
Additions based on tax positions related to prior years
 
 
-
 
Reductions based on tax positions related to prior years
 
 
-
 
Balance at December 31, 2015
 
 
11,400
 
Additions based on tax positions related to the current year
 
 
-
 
Reductions based on tax positions related to the current year
 
 
(11,400)
 
Balance at December 31, 2016
 
$
-
 
 
As of December 31, 2016 and December 31, 2015, the balance in unrecognized tax benefits was $0 and $11,400, respectively. The increases or decreases in each year are the result of management’s assessment that certain positions taken meet or no longer meet the more likely than not criteria established in ASC 740-10.  If these unrecognized tax benefits were ultimately recognized, they would have reduced the Company’s annual effective tax rate.