NOTE 14- INCOME TAXES
The Company has had no income tax expense or benefit since July 1, 1997, because of operating losses. Deferred tax assets and liabilities are determined based on the estimated future tax effect of differences between the financial statement and tax reporting basis of assets and liabilities, as well as for net operating loss carry forwards, given the provisions of existing tax laws. The Company files income tax returns in the U.S. and state jurisdictions and there are open statutes of limitations for taxing authorities to audit the Company’s tax returns from years ended June 30, 2012 through the current period.
The approximate income tax benefit is computed by applying the U.S. federal income tax rate of 35% to net (loss) before taxes for the fiscal years ended after June 30, 2012, and 34% for the prior year periods.
| 2016 | 2015 | |||||
| Tax benefit at the federal statutory rate | $ | 1,737,087 | $ | 2,318,833 | ||
| State tax benefit | 372,233 | 496,893 | ||||
| Expiration of state operating benefit | (395,871 | ) | (432,984 | ) | ||
| Prior year true-up | --- | 822,038 | ||||
| (Increase) in valuation allowance | (1,713,449 | ) | (3,204,780 | ) | ||
| Income tax expense | $ | --- | $ | --- |
The components of the deferred tax assets at June 30, 2016 and 2015 are as follows:
| Deferred Tax Asset | 2016 | 2015 | ||||
| Federal net operating loss carry forwards | $ | 34,269,743 | $ | 32,532,656 | ||
| State net operating loss carry forwards | 3,280,936 | 3,304,574 | ||||
| Valuation allowance | (37,550,679 | ) | (35,837,230 | ) | ||
| Net deferred tax asset | $ | --- | $ | --- |
In assessing the realizability of estimated deferred tax assets, the Company considers whether it is more likely than not that some portion or 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. Due to the Company’s history of losses, the deferred tax assets are fully offset by a valuation allowance as of June 30, 2016 and 2015.
At June 30, 2016, the Company had estimated federal tax basis net operating loss carry forwards for federal income tax purposes of approximately $99.5 million. Net operating losses for federal income tax purposes may be carried back for two years and forward for twenty years. The net operating losses expire in varying amounts from June 30, 2019 to 2036.
At June 30, 2016, the Company had estimated state tax basis net operating loss carry forwards for state income tax purposes of approximately $43.7 million. Net operating losses for state income tax purposes may be carried forward for five years. These losses expire in varying amounts from June 30, 2016 to 2021.