Note 9 - Income Taxes
At December 31, 2016, the Company had federal net operating loss carryforwards of approximately $197,000 for income tax purposes that expire starting in 2037.
There are no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s financial statements for the year ended December 31, 2016. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.
It is the Company’s practice to recognize penalties and/or interest related to income tax matters in general and administrative expense. There are no interest and penalties recognized in the statements of operations or accrued on the balance sheets.
The Company files tax returns in the United States, in various states including California, Colorado and Minnesota. The Company’s United States federal income tax filings for tax years 2013 through 2016 remain open to examination. In general, the Company’s various state tax filings remain open for tax years 2012 to 2016.
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Net loss | $ | (2,862,249 | ) | |||||
Summary of deferred tax assets and liabilities are as follows:
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Deferred tax asset | ||||||||
| Loss carryforward | $ | 79,953 | $ | - | ||||
| Total deferred tax assets | 79,953 | - | ||||||
| Valuation allowance | - | - | ||||||
| Net deferred tax asset | $ | 79,953 | $ | - | ||||
| Deferred tax liability | ||||||||
| Depreciation | $ | (151,247 | ) | $ | - | |||
| Net deferred tax liability | $ | (151,247 | ) | $ | - | |||
| Total deferred tax liability | 71,294 | - | ||||||
Components reflected in the consolidated statements of operations are as follows:
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Current | ||||||||
| Federal | $ | - | $ | - | ||||
| State and local | - | - | ||||||
| - | - | |||||||
| Deferred | ||||||||
| Federal | 59,852 | - | ||||||
| State and local | 11,442 | - | ||||||
| Valuation allowance | - | - | ||||||
| 71,294 | - | |||||||
| Total income tax provision | $ | 71,294 | $ | - | ||||
The following is a reconciliation of the statutory federal income tax rate applied to pre-tax accounting net loss compared to the income taxes in the consolidated statements of operations:
| For the Years Ended | ||||||||
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Income tax benefit at the statutory rate | $ | (974,581 | ) | $ | (137,666 | ) | ||
| Change resulting from | ||||||||
| State and local income taxes, net of federal income tax | (186,317 | ) | ||||||
| Deferred tax liabilities - acquisition | 193,375 | |||||||
| Pre-acquisition loss | 1,025,765 | |||||||
| Non-deductible and other | 13,052 | |||||||
| Income tax expense of partners profit prior to transaction | 0 | 137,666 | ||||||
| $ | 71,294 | - | ||||||