NOTE 8. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The cumulative tax effect of significant items comprising the net deferred tax amount is at December 31, 2016 and 2015 as follows:
| 2016 | 2015 | |||||
| Deferred tax assets: | ||||||
| Net operating losses | $ | 260,502 | $ | - | ||
| Total deferred tax assets | 260,502 | - | ||||
| Less: valuation allowance | (249,728 | ) | - | |||
| Deferred tax assets, net | $ | 10,774 | $ | - |
As of December 31, 2016, for U.S. federal income tax reporting purposes, the Company has approximately $805,636 of unused net operating losses (“NOLs”) available for carry forward to future years. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOLs for federal income tax purposes should the Company generate taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.
Significant components of income tax expense for the years ended December 31, 2016 and 2015are as follows
| 2016 | 2015 | |||||
| Current tax expense | $ | 7,225 | $ | 26,950 | ||
| Benefits of operating loss carryforwards | (10,774) | - | ||||
| Tax expense (benefit) | $ | 3,549 | $ | 26,950 |
The Company had $42,972 and $35,747 of income tax liability as of December 31, 2016 and 2015 respectively.
Reconciliation of Effective Income Tax Expense is as follows
| 2016 | 2015 | |||||
| Statutory U.S. tax | $ | (253,277) | $ | 26,950 | ||
| Less: Valuation Allowance | 249,728 | - | ||||
| Tax expense (benefit) | $ | 3,549 | $ | 26,950 |