Note 8. Income Taxes
ASC 740 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
For the year ended December 31, 2016, the Company had a cumulative net operating loss carryover of approximately $1,839,366 available for U.S federal income tax, which expire beginning in 2017. The net operating loss carryovers may be subject to limitations under Internal Revenue Code due to significant changes in the Company’s ownership. The Company has provided a full valuation allowance against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the earnings history of the Company, it is more likely than not that the benefits will not be realized.
Deferred net tax asset (34%) consists of the following at December 31, 2016:
| 2016 | 2015 | ||||||
| Deferred tax asset | $ | 1,515,712 | $ | 1,062,352 | |||
| Less valuation allowance | (1,515,712 | ) | (1,062,352 | ) | |||
| Net deferred tax asset | $ | - | $ | - | |||
A reconciliation between income taxes at statutory tax rates (34%) and the actual income tax provision for continuing operations as of December 31, 2016 follows:
| 2016 | 2015 | ||||||
| Expected Provision (based on statutory rate) | $ | (453,360 | ) | $ | (551,219 | ) | |
| Increase to deferred tax valuation allowance for net operating loss carry forward | 453,360 | 551,219 | |||||
| Net provision | $ | - | $ | - |
The Company has filed its tax returns through December 31, 2015, and filed for a six months extension on its December 31, 2016 tax return filing.
The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure.
Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
All past six tax years for the Company remain subject to future examinations by the applicable taxing authorities.