NOTE 10 – INCOME TAXES
The Company follows ASC 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed likely to be realized.
The provision for refundable federal income tax consists of the following for the periods ending:
| December 31, 2017 |
December 31, 2016 |
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| Federal income tax benefit at the statutory rate: | ||||||||
| Net loss | $ | (693,000 | ) | $ | (715,000 | ) | ||
| Effect of rate change | 715,000 | — | ||||||
| Change in valuation allowance | (22,000 | ) | 715,000 | |||||
| Net benefit | $ | — | $ | — | ||||
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
| December 31, 2017 |
December 31, 2016 |
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| Deferred tax attributed: | ||||||||
| Net operating loss carryover | $ | 3,300,000 | $ | 2,041,000 | ||||
| Effect of rate change | (2,607,000 | ) | — | |||||
| Less: valuation allowance | (693,000 | ) | (2,041,000 | ) | ||||
| Net deferred tax asset | $ | — | $ | — | ||||
At December 31, 2017, the Company had an unused net operating loss carryforward approximating $9,700,000 that is available to offset future taxable income; the loss carryforward will start to expire in 2028. The Company’s tax returns are open to audit under the statute of limitations for the years ending 2014 through 2016 for federal tax purposes.
Effect of New Federal Tax Reform Legislation
On December 22, 2017, new federal tax reform legislation was enacted in the United States (the “2017 Tax Act”), resulting in significant changes from previous tax law. The 2017 Tax Act reduces the federal corporate income tax rate to 21% from 35% effective January 1, 2018. The rate change, along with certain immaterial changes in tax basis resulting from the 2017 Tax Act, resulted in a reduction of the Company’s deferred tax assets of $7,947,029 and a corresponding reduction in the valuation allowance.