The Company utilizes ASC 740 “Income Taxes”, which 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 statement 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 years ended December 31, 2016 and 2015, the Company had available for U.S federal income tax purposes net operating loss carryovers of approximately $877,553 and $892,447 respectively, which expire beginning in year 2031. 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.
The income tax provision (benefit) consists of the following:
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Federal: | ||||||||
| Current | $ | 5,213 | $ | (34,734 | ) | |||
| Deferred | (312,357 | ) | (277,622 | ) | ||||
| (307,144 | ) | (312,356 | ) | |||||
| Change in valuation allowance | 307,144 | 312,356 | ) | |||||
| Income tax provision (benefit) | $ | - | $ | - | ||||
Following tax rates were used to calculate deferred taxes for the years ended December 31, 2016 and 2015:
| Statutory federal income tax rate | 35.00 | % | ||
| Effective tax rate | 35.00 | % |
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 derecognition, 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. Accordingly, the adoption of these provisions of ASC 740 did not have a material effect on the Company’s financial statements. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.
All tax years for the Company remain subject to future examinations by the applicable taxing authorities.