Note

 

On the United States enacted the Tax Cuts and Jobs Act (“the Act”), which made significant changes that affect the Company. Among other provisions, the Act lowered the U.S. Federal corporate tax rate to effective Since the change in tax rate is effective until the current income tax provision in is unaffected. The Company measures its deferred tax assets and liabilities using the enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were re-measured to reflect the reduction in the corporate tax rate to which resulted in a increase in income tax benefit and a corresponding decrease in net deferred tax liabilities during

 

The Act is a comprehensive tax reform bill containing a number of other provisions that either currently or in the future could impact the Company. The Company has completed the analysis of the Act and does expect a material change due to the transition impacts. Any changes that do arise due to changes in interpretations of the Act, legislative action to address questions that arise because of the Act, changes in accounting standards for income taxes or related interpretations in response to the Act, or any updates or changes to estimates the Company has utilized to calculate the transition impacts will be disclosed in future periods as they arise. The effect of certain limitations effective for the tax year and forward, specifically related to the deductibility of executive compensation and interest expense, have been evaluated.

 

Components of deferred taxes

 

		December 31,
		2017				2016
Assets:
Net Leasehold Impairment Reserves		$	189,867			$	290,167
Gas Balance Receivable			32,352				52,379
Long-Lived Asset Impairment			945,399				1,745,936
Deferred Geological and Geophysical Expense			47,539				62,720
Other			266,141				406,579
Total Assets			1,481,298				2,557,781
Liabilities:
Receivables			59,561				91,622
Intangible Drilling Costs			1,614,470				2,856,294
Depletion, Depreciation and Other			725,317				1,121,025
Total Liabilities			2,399,348				4,068,941
Net Deferred Tax Liability		$	(918,050	)		$	(1,511,160	)

 

The decrease in the deferred tax liability for reflected in the above table is primarily the result of the decrease in the corporate tax rate to as noted above and a decline of intangible drilling costs.

 

The following table summarizes the current and deferred portions of income tax expense:

 

		Year Ended December 31,
		201 7				201 6
Current Tax Provision /(Benefit):
Federal		$	10,362			$	(57,494	)
State			167				(182	)
Total Current Provision /(Benefit)			10,529				(57,676	)
Deferred Tax Benefit			(593,111	)			(115,210	)
Total Benefit		$	(582,582	)		$	(172,886	)

 

The total income tax benefit expressed as a percentage of income/(loss) before income tax, excluding effect of change in federal income tax rate discussed below, was for and for These amounts differ from the amounts computed by applying the statutory U.S. federal enacted income tax rate for and as summarized in the following reconciliation:

 

		Year Ended December 31,
		201 7				201 6
Computed Federal Tax Provision/(Benefit)		$	35,035			$	(87,418	)
Increase (Decrease) in Tax From:
Allowable Depletion in Excess of Basis			(51,533	)			(83,460	)
Dividend Received Deduction			(618	)			(878	)
State Income Tax Benefit			(167	)			(182	)
Federal Income Tax Rate Change			(577,797	)			---
Other			12,498				(948	)
Income Tax Benefit		$	(582,582	)		$	(172,886	)
Effective Tax Rate			5%				67%

 

Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. When a provision for income taxes is recorded, federal excess percentage depletion benefits decrease the effective tax rate. When a benefit for income taxes is recorded, federal excess percentage depletion benefits increase the effective tax rate. The benefit of federal excess percentage depletion is directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where a recorded pre-tax income is relatively small or a pre-tax loss, the proportional effect of these items on the effective tax rate be significant.