Note 6 – Income Tax Provision
Deferred Tax Assets
As of June 30, 2017 and 2016, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $134,136 and $110,346, respectively that may be offset against future taxable income which begin to expire in 2034. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance. In addition, due to the changes of controls of the Company on January 12, 2016 and March 12, 2016, the carry-forward losses generated through these dates will be significantly limited in their use.
The provision (benefit) for income taxes consisted of the following for the years ended June 30, 2017 and 2016:
| 2017 | 2016 | |||||||
| Current | $ | — | $ | — | ||||
| Deferred | (9,516 | ) | (5,856 | ) | ||||
| Change in valuation allowance | 9,516 | 5,856 | ||||||
| Income tax provision (benefit) | $ | — | $ | — | ||||
Components of deferred tax assets are as follows:
| June 30, 2017 | June 30, 2016 | |||||||
| Net deferred tax assets – Non-current: | ||||||||
| Expected income tax benefit from NOL carry-forwards | $ | 26,067 | $ | 16,551 | ||||
| Less valuation allowance | (26,067 | ) | (16,551 | ) | ||||
| Deferred tax assets, net of valuation allowance | $ | — | $ | — | ||||
The following table reconciles the effective income tax rates with the statutory rates for the years ended June 30:
| 2017 | 2016 | |||||||
| U.S. federal statutory rate | 34.0 | % | 15.0 | % | ||||
| State and local taxes-net of federal benefit | 6.0 | % | — | |||||
| Change in valuation allowance | (40.0 | ) | (15.0 | ) | ||||
| Effective income tax rate | -% | -% | ||||||
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
We follow ASC 740 Accounting for Uncertainty in Income Taxes. Under ASC 740, tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in our tax returns that do not meet these recognition and measurement standards. We had no liabilities for unrecognized tax benefits at June 30, 2017 and 2016.
Our policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the years ended June 30, 2017 and 2016, we did not recognize any interest or penalties in our statement of operations, nor did we have any interest or penalties accrued in our balance sheet at June 30, 2017 and 2016 relating to unrecognized tax benefits.
The tax years 2015 to 2017 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject.