The Company recorded no income tax provision for 2017 and 2016 because of losses incurred. The Company has placed a full valuation allowance against net deferred tax assets because future realization of these assets is not assured.
The following is a reconciliation between the federal income tax benefit computed at statutory federal income tax rates and actual income tax provision for the years ended December 31, 2017 and 2016:
| Year ended | Year ended | |
| December 31, 2017 | December 31, 2016 | |
| Federal income tax benefit at statutory rate | $ (312,769) | $ (2,869,293) |
| Permanent Differences | 1,640 | 3,000 |
| Other | 719,197 | 4,096,946 |
| Change in valuation allowance | (9,186,334) | (1,230,653) |
| Change in federal tax rate | 8,778,266 | - |
| Provision for income taxes | $ - | $ - |
The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2017 and December 31, 2016 are as follows:
| December 31, 2017 | December 31, 2016 | ||
| Deferred tax assets: | |||
| Net operating loss carryforward | $ 11,116,332 | $ 16,269,090 | |
| Accruals | 9,450 | 15,300 | |
| Reserves | 4,501,899 | 7,156,559 | |
| Deferred tax liabilities: | |||
| Intangible drilling and other costs for oil and gas properties | (1,447,405) | (74,340) | |
| Net deferred tax assets and liabilities | 14,180,276 | 23,366,609 | |
| Less valuation allowance | (14,180,276) | (23,366,609) | |
| Total deferred tax assets and liabilities | $ - | $ - |
The Company had a net deferred tax asset related to federal net operating loss carryforwards of $52,934,915 and $51,028,330 at December 31, 2017 and December 31, 2016, respectively. The federal net operating loss carryforward will begin to expire in 2032. Realization of the deferred tax asset is dependent, in part, on generating sufficient taxable income prior to expiration of the loss carryforwards. The Company has placed a 100% valuation allowance against the net deferred tax asset because future realization of these assets is not assured.
On December 22, 2017, the U.S. government enacted comprehensive legislation titled the Tax Cuts and Jobs Act. Generally, effective for years 2018 and beyond, it makes broad and complex changes to the Internal Revenue Code, including, but not limited to, reducing the federal corporate income tax rate from 35% to 21%. As of December 31, 2017 we have made a reasonable estimate of the effects on our deferred tax assets and liabilities of the change in the corporate tax rate to be effective in 2018. The estimated amount is included our computation of net deferred tax assets and liabilities and the related valuation allowance.