NOTE 2. INCOME TAXES
There is no current or deferred income tax expense or benefit for the years ended December 31, 2016 or 2015.
The Company records deferred income taxes under applicable tax laws using rates for the years in which the taxes are expected to be paid. Deferred income taxes reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets may not be realized. The Company did not record an income tax provision for all periods presented due to its expected benefits from net operating losses being completely offset by valuation allowances.
The items causing this difference for the periods ended December 31, 2016 and 2015 are as follows.
| 2016 | 2015 | |||||||
| Tax benefit at U.S. and state statutory rates | $ | 187,400 | $ | 103,600 | ||||
| less: portion of income flowing directly to former | ||||||||
| shareholders of Digital Donations, Inc. | (176,200 | ) | (103,600 | ) | ||||
| less: valuation allowance | (11,200 | ) | - | |||||
| Tax benefit, net | $ | — | $ | — | ||||
At December 31, 2016, the Company has estimated net operating loss carryforwards for federal income tax purposes of approximately $32,950. The actual amount of net operating losses will be determined at the time the Company’s tax returns are filed. The Company made no payments for income taxes for the years ended December 31, 2016 and 2015.
Deferred tax assets were comprised of the following as of December 31, 2016:
| Current deferred tax asset | $ | - | ||
| NOL carryforward | 11,200 | |||
| Long-term deferred tax asset | 11,200 | |||
| Total deferred tax asset | 11,200 | |||
| Less valuation allowance | (11,200 | ) | ||
| Net deferred tax asset | $ | - |
No amounts have been included in the table above for 2015 because prior to the recapitalization of Digital Donations Technologies, Inc., the financial statements presented herein are those of Digital Donations, Inc., which was taxed under the Internal Revenue Code of the United States as an S Corporation and therefore all of its income or losses passed through to its shareholders and therefore Digital Donations, Inc. was not responsible for the income tax liability or could benefit from any deferred or current income tax assets.
Neither the Company nor its subsidiary have filed tax returns for either 2015 or 2016. The Company expects to file all of its past due returns for 2015 and the 2016 returns, which are under extension, in 2017. No taxes, penalties or interest will be due because of the losses incurred from inception, or because the subsidiary is considered a 'pass through' entity as noted above.