Note 8. Income Tax
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Reform Bill”) was signed into law. Prior to the enactment of the Tax Reform Bill, the Company measured its deferred tax assets at the federal rate of 34%. The Tax Reform Bill reduced the federal tax rate to 21% resulting in the re-measurement of the deferred tax asset as of December 31, 2017. Beginning January 1, 2018, the lower tax rate of 21% will be used to calculate the amount of any federal income tax due on taxable income earned during 2018.
The Company’s net deferred tax assets are as follows:
| December 31, 2017 | ||||
| Deferred tax asset | ||||
| Organizational costs/Startup expenses | $ | 66,079 | ||
| Total deferred tax assets | 66,079 | |||
| Valuation allowance | (66,079 | ) | ||
| Deferred tax asset, net of allowance | $ | — | ||
The income tax provision consists of the following:
| Year Ended December 31, 2017 | ||||
| Federal | ||||
| Current | $ | 960,577 | ||
| Deferred | (66,079 | ) | ||
| State | ||||
| Current | $ | — | ||
| Deferred | — | |||
| Change in valuation allowance | 66,079 | |||
| Income tax provision | $ | 960,577 | ||
As of December 31, 2017, the Company had no U.S. federal and state net operating loss carryovers (“NOLs”) available to offset future taxable income. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of a change in control as defined under the regulations.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2017, the change in the valuation allowance was $66,079.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2017 is as follows:
| Year Ended December 31, 2017 | ||||
| Statutory federal income tax rate | 34.0 | % | ||
| State taxes, net of federal tax benefit | 0.0 | % | ||
| Deferred tax rate change | 1.5 | % | ||
| Change in valuation allowance | 2.6 | % | ||
| Income tax provision | 38.2 | % | ||