Note 3 - Taxes on Income
Income tax expense is $-0- for both 2017 and 2016, including $-0- in current taxes and $-0- in deferred taxes for both 2017 and 2016.
A reconciliation of income tax expense recognized to income taxes at statutory rates is as follows:
| | | Year Ended December 31, | |
| | | 2017 | | 2016 | |
| | | | | | | | |
| Tax benefit computed at 34% of pre-tax loss | | $ | (6,300) | | $ | (7,100) | |
| Changes in tax laws | | | 50,000 | | | -0- | |
| Change in valuation allowance | | | (43,700) | | | 7,100 | |
| Income tax expense | | $ | -0- | | $ | -0- | |
Tax Cuts and Jobs Act (TCJA) tax reform legislation enacted on December 22, 2017 makes major changes to the U.S. corporate income tax system, including lowering the U.S. federal corporate income tax rate to 21 percent from 34 percent, limiting or eliminating certain existing tax deductions, credits and incentives, allowing immediately expensing of capital expenditures through 2022, and eliminating the expiration of net operating loss carryforwards for losses generated in 2018 or after. ASC 740 requires companies to recognize the effects of tax law changes in the period of enactment, which for us was the fourth quarter of 2017, even though the effective date of most provisions of the TCJA is January 1, 2018. TCJA resulted in significant changes to the our fourth quarter 2017 income tax provision most notably a reduction in our deferred tax asset, before valuation allowance, as a result of the lower corporate income tax rate.
At December 31, 2017, the Company has net operating loss carryforwards (“NOLs”) of approximately $385,000 that can be used to offset future taxable income, and such NOLs result in a gross deferred tax asset of approximately $82,000 at that date. These NOLs expire in varying amounts through 2036. Realization of these NOLs is subject to annual limitations under current IRS regulations pursuant to change in control provisions and is dependent on the existence of future taxable income. At December 31, 2017 and 2016, a valuation allowance has been recognized for the entire amount of the Company's net deferred tax asset. The valuation allowance decreased by $43,000 in 2017, decreasing from $125,000 at December 31, 2016 to $82,000 at December 31, 2017.