NOTE 10 – INCOME TAXES
No provision was made for income taxes for the years ended September 30, 2017 and 2016 as the Company had incurred net losses for tax purposes of $610,083 and $233,273, respectively.
The income tax expense (benefit) differs from the amount computed by applying the United States Statutory corporate income tax rate as follows:
| 2017 | 2016 | ||||
| United States statutory corporate income tax rate | 34.0% | 34.0% | |||
| Change in valuation allowance on deferred tax assets | -34.0% | -34.0% | |||
| Provision for income tax | –% | –% | |||
Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are approximately as follows:
| September 30, | |||||
| Deferred income tax assets: | 2017 | 2016 | |||
| Net operating loss carry forwards | $ | 425,000 | $ | 224,930 | |
| Valuation allowance | (425,000) | (224,930) | |||
| Net deferred income tax assets | $ | – | $ | – | |
The Company has established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization. The valuation allowance increased by $200,070 and $79,310 for the years ended September 30, 2017 and 2016, respectively.
No provision for income taxes has been provided in these financial statements due to the net loss for the years ended September 30, 2017 and 2016. At September 30, 2017, the Company has net operating loss carry forwards of approximately $1,250,000 which expire commencing 2031. The potential tax benefit of these losses may be limited due to certain change in ownership provisions under Section 382 of the Internal Revenue Code (“IRS”) and similar state provisions. Congress has recently passed tax reform legislation which will likely and possible significantly affect the Company’s financial statement. The Company is currently evaluating the impact of this legislation on its financial statements.
IRS Section 382 places limitations (the “Section 382 Limitation”) on the amount of taxable income which can be offset by net operating loss carry forwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carry forwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the net operating loss and tax credit carry forwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The Company has not concluded its analysis of Section 382 through September 30, 2017, but believes the provisions will not limit the availability of losses to offset future income.
The Company is subject to income taxes in the U.S. federal jurisdiction and the state of Nevada. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. As of September 30, 2017, the Company has not filed any tax returns. As of September 30, 2017, tax years 2007 through 2017 remain open for IRS audit. The Company has received no notice of audit from the IRS for any of the open tax years.