CleanTech Biofuels, Inc.

Note

–

Income Taxes

The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

he Company incurred no income taxes for the years ended

December

31,

2016,

2015

and

2014.

The expected income tax benefit and resulting deferred tax asset for the years ended

December

31,

2015,

2014

and

2013

is approximately

$281,000,

$254,000

and

$278,000,

respectively. These benefits are the result of temporary differences (start-up costs, stock compensation and other items) and operating loss carryforwards. The difference between the expected income tax benefit and non-recognition of an income tax benefit in each period is the result of a valuation allowance applied to deferred tax assets. A valuation allowance in the same amount of the benefit has been provided to reduce the deferred tax asset, as realization of the asset is not assured.

December

31,

2016,

the Company has the following net operating loss (“NOL”) carryforwards which are available to offset future taxable income.

Year NOL expires:	Amount
2026	$	18,000
2027		149,000
2028		669,000
2029		928,000
2030		28,000
2032		51,000
2033		52,000
2034		18,000
2035		18,000
2036		78,000
	$	2,009,000

This NOL results

in a net deferred tax asset of approximately

$829,000

for which the Company has recorded a full valuation allowance. The NOL carryforwards

may

be limited under the Change of Control provisions of the Internal Revenue Code section

382.

Temporary differences which give rise to net deferred tax assets are:

	At December 31,
	2016			2015
Start-up costs	$	1,025,000		$	975,000
Net operating loss carryforward		829,000			799,000
Accrual to cash conversion		1,888,000			1,687,000
Share-based compensation related to stock options		312,000			312,000
Other		6,000			6,000
Total		4,060,000			3,779,000
Valuation allowance		(4,060,000	)		(3,779,000	)
Net deferred tax asset	$	-		$	-