Note 9. Income Taxes

We account for income taxes using the asset and liability method of accounting for income taxes. Deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rate applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and result primarily form differences in methods used to amortize intangible assets. A valuation allowance is provided when management cannot determine whether it is more likely than not that the deferred tax asset will be realized. The effect on deferred income taxes of the change in tax rates is recognized in income in the period that includes the enactment date. The difference between the statutory tax rate and the effective tax rate is the valuation allowance.

The provision of income taxes consists of the following for the years ended December 31, 2016 and 2015:

During 2016, the Company recorded an income tax provision of $86,378 related to income taxes for NOW Solutions, a 75% owned subsidiary of the Company. During 2015, the Company recorded an income tax benefit of $571,980 related to the settlement of previously recorded income taxes for the NOW Solutions in Canada.

Temporary difference between the financial statement carrying amount and tax bases of assets and liabilities that give rise to deferred tax assets relate to the following:

At December 31, 2016 and December 31, 2015, VCSY had available net operating loss carry-forwards of approximately $20.6 million and $24.0 million, respectively. At December 31, 2016 and 2015, NOW Solutions had available net operating loss carry-forwards of approximately $281,000. These net operating loss carry-forwards expire in varying amounts through 2031.

The benefit for income taxes differs from the amount computed by applying the U.S. federal income tax rate of 34% to loss before income taxes as follows for the years ended December 31, 2016 and 2015:

During 2015, Canada Revenue Agency began garnishing NOW Solutions Canada customer receivables in order to pay down debts owed to them for income tax and goods and services tax (“GST”). The customer accounts receivable payments were applied directly to the taxes owed. As of December 31, 2016, all garnishments were removed and debts have been paid.

Open tax years for U.S. federal income taxes for VCSY are 2012, 2013, 2014, 2015 and 2016. Open tax years for U.S. federal income taxes for NOW Solutions are 2013, 2014, 2015 and 2016.