12. INCOME TAXES
The components of the provision for income tax expense are as follows for the years ended:
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Current taxes | ||||||||
| Federal | $ | — | $ | — | ||||
| State | — | — | ||||||
| Current taxes | — | — | ||||||
| Change in deferred taxes | — | 82,112 | ||||||
| Change in valuation allowance | — | (82,069 | ) | |||||
| Provision for income tax expense | $ | — | $ | 43 | ||||
The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2016:
| Deferred tax assets: | ||||
| Equity based compensation | $ | 210,263 | ||
| Allowance for doubtful accounts | 15,000 | |||
| Net operating loss carryforward | 1,015,748 | |||
| On-line training certificate reserve | 818 | |||
| Total deferred tax assets | 1,241,829 | |||
| Valuation allowance | (1,239,309 | ) | ||
| Deferred tax assets net of valuation allowance | 2,520 | |||
| Less deferred tax assets – non-current, net of valuation allowance | 2,330 | |||
| Deferred tax assets – current, net of valuation allowance | $ | 190 | ||
The effective tax rate used for calculation of the deferred taxes as of December 31, 2016 was 37.63%. The Company has established a valuation allowance against deferred tax assets of $1,239,309 or 99.8%, due to the uncertainty regarding realization, comprised primarily of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts, and 99% reserve against the deferred tax assets attributable to the equity based compensation.
The significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as follows:
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Statutory tax rate | 34.00 | % | 34.00 | % | ||||
| State tax, net of Federal benefits | 3.63 | % | 3.63 | % | ||||
| Change in valuation allowance | (37.63 | )% | (37.63 | )% | ||||
| Effective tax rate | — | % | — | % | ||||
The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2015, Restated:
| Deferred tax assets: | ||||
| Equity based compensation | $ | 97,276 | ||
| Allowance for doubtful accounts | 9,520 | |||
| Depreciation and amortization timing differences | — | |||
| Net operating loss carryforward | 1,015,748 | |||
| On-line training certificate reserve | 818 | |||
| Total deferred tax assets | 1,123,362 | |||
| Valuation allowance | (1,120,842 | ) | ||
| Deferred tax assets net of valuation allowance | 2,520 | |||
| Less deferred tax assets – non-current, net of valuation allowance | 2,330 | |||
| Deferred tax assets – current, net of valuation allowance | $ | 190 | ||
The effective tax rate used for calculation of the deferred taxes as of December 31, 2015 was 34%. The Company has established a valuation allowance against deferred tax assets of $1,120,842 or 99.8%, due to the uncertainty regarding realization, comprised primarily of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts, and 97% reserve against the deferred tax assets attributable to the equity based compensation.