The components of income tax expense for the years ended December 31, 2016 and 2015 consist of the following:

 

		2016				2015
Current tax provision		$	—			$	—
Deferred tax benefit			(321,000)				(16,853,000)
Valuation allowance			321,000				16,853,000
Total income tax provision		$	—			$	—

 

Reconciliations between the statutory rate and the effective tax rate for the years ended December 31, 2016 and 2015 consist as follows:

 

		2016				2015
Federal statutory tax rate			(34.0)	%			(34.0)	%
State taxes, net of federal benefit			0	%			0	%
Permanent differences			—				—	%
Expiration of Stock Options			—				—	%
Other			—				—	%
Valuation allowance			34	%			34	%
Effective tax rate			—				—

 

Significant components of the Company's estimated deferred tax assets and liabilities as of December 31, 2016 and 2015 are as follows:

 

		2016				2015
Deferred tax assets:
Net operating loss carryforwards		$	11,299,000			$	10,978,000
Impairment of assets			11,310,000				11,310,000
Stock based compensation			3,607,000				3,607,000
Loss on settlement of debt			51,000				51,000
Total deferred tax asset			26,267,000				25,946,000
Valuation allowance			(26,267,000)				(25,946,000)
		$	-			$	-

 

As of December 31, 2016, we had approximately $33,232,000 of federal net operating loss carry forwards. These carry forwards, if not used, will begin to expire in 2028. Future utilization of our net operating loss carry forwards is subject to certain limitations under Section 382 of the Internal Revenue Code. We believe that the issuance of our common stock in exchange for the Shea Mining and Milling properties in March of 2011 resulted in an “ownership change” under the rules and regulations of Section 382. Accordingly, our ability to utilize our net operating losses generated prior to this date is limited to approximately $1,000,000 annually.

 

As of December 31, 2016, we do not believe any of our net operating loss carry forward consists of deductions generated by the exercise of warrants or options to purchase our stock. In the future, the stock options referenced in the above table of deferred tax items may be exercised and we may receive a tax deduction. To the extent that the tax deduction is included in a net operating loss carry forward and is in excess of amounts recognized for book purposes, no benefit will be recognized until the loss carry forward is recognized. Upon utilization and realization of the carry forward, the corresponding change in the deferred asset and valuation allowance will be recorded as additional paid-in capital.

 

We provide for a valuation allowance when it is more likely than not that we will not realize a portion of the deferred tax assets. We have established a valuation allowance against our net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, we have not reflected any benefit of such deferred tax assets in the accompanying financial statements. Our net deferred tax asset and valuation allowance increased by $321,000 in the year ended December 31, 2016.

 

We reviewed all income tax positions taken or that we expect to be taken for all open years and determined that our income tax positions are appropriately stated and supported for all open years. The Company is subject to U.S. federal income tax examinations by tax authorities for years after 2011 due to unexpired net operating loss carryforwards originating in and subsequent to that year. The Company may be subject to income tax examinations for the various taxing authorities which vary by jurisdiction.