Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur. The Company accounts for income taxes pursuant to ASC 740.
Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses and other items. Loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.
The Company follows FASB Statement Accounting Standards Codification No. 740, “Accounting for Income Taxes”, which requires, among other things, an asset and liability approach to calculating deferred income taxes. The components of the deferred income tax assets and liabilities arising under ASC No. 740 were as follows:
There were no deferred income taxes at December 31, 2016 and 2015.
The types of temporary differences between the tax basis of assets and their financial reporting amounts that give rise to a significant portion of the deferred assets and liabilities are as follows:
| December 31, | December 31, | |||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Temporary | Tax | Temporary | Tax | |||||||||||||
| Difference | Effect | Difference | Effect | |||||||||||||
| Deferred tax assets: | ||||||||||||||||
| Net operating loss | $ | 10,182,607 | $ | 3,773,674 | $ | 9,081,267 | $ | 6,172,980 | ||||||||
| Valuation allowance | (10,182,607 | ) | (3,773,674 | ) | (9,081,267 | ) | (6,172,980 | ) | ||||||||
| Total deferred tax asset | -0- | -0- | -0- | -0- | ||||||||||||
| Net deferred tax asset | $ | -0- | $ | -0- | $ | - | $ | - | ||||||||
Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.
At December 31, 2016 and December 31, 2015, the Company had approximately and $8,965,443, respectively, in unused federal net operating loss carryforwards, which begin to expire principally in the year 2029. A deferred tax asset at each date of approximately $3,773,674 and $3,166,368 resulting from the loss carryforwards has been offset by a 100% valuation allowance. The change in the valuation allowance for the period ended December 31, 2016 and December 31, 2015 was approximately and $607,306.
A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| U.S. Federal statutory graduated rate … | 34.00 | % | 34.00 | % | ||||
| State income tax rate, net of federal benefit | 3.06 | % | 4.63 | % | ||||
| Net rate | 37.06 | % | 38.63 | % | ||||
| Net operating loss used | 0.00 | % | 0.00 | % | ||||
| Net operating loss for which no tax benefit is currently available | -37.06 | % | -38.63 | % | ||||
| 0.00 | % | 0.00 | % | |||||
The Company’s income tax filings are subject to audit by various taxing authorities. The Company’s open audit periods are 2013, 2014, and 2015, although, the statute of limitations for the 2013 tax year will expire effective March 15, 2017. In evaluating the Company’s provisions and accruals, future taxable income, and reversal of temporary differences, interpretations and tax planning strategies are considered. The Company believes its estimates are appropriate based on current facts and circumstances.