Note 21.  Income taxes

 

For financial statement purposes, loss before the income tax provision is divided amongst the following;

 

		2017			2016
Domestic		$	(11,993,500)		$	(34,186,424)
Foreign			(362,274)			2,780,006
Total loss before income tax provision		$	(12,355,774)		$	(31,406,418)

 

The Company files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. The applicable statutory tax rates vary between none (zero) and 34%. However, because the Company and its subsidiaries have incurred annual corporate income tax losses since their inception, management has determined that it is more likely than not that the Company will not realize the benefits of its US and foreign net deferred tax assets. Therefore, the Company has recorded a full valuation allowance to reduce the net carrying amount of the deferred taxes to zero. The Company’s 2017 provision for income taxes of $107,205 relates to taxable income in some jurisdictions.

 

In the ordinary course of business, the Company is subject to tax examinations in the jurisdictions in which it files tax returns. The Company’s statute of limitations for tax examinations is four years for federal and state purposes and four to six years in the major foreign jurisdictions in which the company files.

 

Income tax (benefit)/expense for each year is summarized as follows:

 

		December 31, 2017			December 31, 2016
Current:
Federal		$	-		$	-
State			-			-
Foreign			107,205			38,286
			107,205			38,286
Deferred:
Federal			-			-
State			-			-
Foreign			-			-
Income tax (benefit)/ expense		$	107,205		$	38,286

 

The following is a reconciliation of the provision for income taxes at the US federal statutory rate (34%) to the foreign income tax rate for the years ended:

 

		December 31, 2017			December 31, 2016
Tax expense (credit) at statutory rate federal			34	%		34	%
State tax expense net of federal tax			-			-
Foreign income tax rate difference			(3)	%		(3)	%
Change in valuation allowance			(32)	%		(32)	%
Other			0	%		0	%
Income tax (benefit)/ expense			(1)	%		(1)	%

 

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, are as follows:

 

		2017			2016
Deferred tax assets:
Net Operating Losses		$	35,524,956		$	47,284,369
Total gross deferred tax assets			35,524,956			47,284,369
Less: valuation allowance			(35,524,956)			(47,284,369)
Net deferred tax assets		$	-		$	-

 

As of December 31, 2017, and 2016, the Company had significant net operating losses carryforwards of approximately $109 million and $143 million, respectively. The deferred tax assets have been offset by a full valuation allowance in 2017 and 2016 due to the uncertainty of realizing any tax benefit for such losses. Releases of the valuation allowances, if any, will be recognized through earnings. 

 

 

Section 382 of the Internal Revenue Code limits the use of net operating loss and tax credit carry forwards in certain situations where changes occur in the stock ownership of a company. In the event the Company has a change in ownership, utilization of the carry forward could be restricted.

 

The Company files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. Due to the net operating loss, all the tax years are open for tax examination. As of December 31, 2017, and 2016, the Company accrued an ASC 740-10 tax reserve of $ 246,370 and $0, respectively, for uncertain tax (benefits)/liability including interest and penalties.