RING ENERGY, INC.

NOTE 13 – INCOME TAXES

For the years ended December 31, 2017, 2016 and 2015, components of our provision for income taxes are as follows:

Provision for Income Taxes	2017		2016		2015
Deferred taxes	$	10,416,171	$	(19,987,585)	$	(5,003,713)
Provision for (Benefit from) Income Taxes	$	10,416,171	$	(19,987,585)	$	(5,003,713)

The following is a reconciliation of income taxes computed using the U.S. federal statutory rate to the provision for income taxes:

Rate Reconciliation	2017		2016		2015
Tax at federal statutory rate (34%)	$	4,194,556	$	(19,592,592)	$	(4,779,205)
Non-deductible expenses		6,158		2,558		6,599
Excess tax benefit from stock option exercises		(453,217)		15,055		(89,597)
Adjust prior estimates to tax return		(58,766)		167,526		-
States taxes, net of Federal benefit		124,200		(580,132)		(141,510)
Effect of departure from State of Kansas		(350,059)		-		-
Adjustment for change in future effective tax rate ⁽¹⁾		6,953,299		-		-
Provision for (Benefit from) Income Taxes	$	10,416,171	$	(19,987,585)	$	(5,003,713)

(1) The enactment of the Tax Cuts and Jobs Act provided for a decrease in the corporate tax rate to 21% from 35%, resulting in a net $6.95 million reduction to our net deferred tax asset as of December 31, 2017.

The net deferred taxes consisted of the following at December 31, 2017 and 2016:

Deferred Taxes:	2017		2016
Deferred tax liabilities
Property and equipment	$	27,563,290	$	10,092,289

Deferred tax assets
Stock-based compensation		6,667,643		3,814,909
Operating loss and IDC carryforwards		32,127,847		26,329,288
Deferred tax assets		38,795,490		30,144,197
Net deferred income tax asset	$	(11,232,200)	$	(20,051,908)

As of December 31, 2017, the Company had net operating loss carry forwards for federal income tax reporting purposes of approximately $106.9 million which, if unused, will begin to expire in 2027 and fully expire in 2037.