The components of income tax expense are as follows for the years ended December 31:
| 2016 | 2015 | |||||||
| Current | $ | 1,295 | $ | 1,270 | ||||
| Deferred | – | – | ||||||
| Total | $ | 1,295 | $ | 1,270 | ||||
Deferred tax assets are calculated using a combined statutory tax rate of 39%. The Company’s deferred income tax asset and the related valuation allowance are as follows at December 31:
| 2016 | 2015 | |||||||
| Deferred tax assets - current: | ||||||||
| Accrued compensation | $ | 184,324 | $ | 128,749 | ||||
| Accrued interest – related party | 480 | 372 | ||||||
| 184,804 | 129,121 | |||||||
| Deferred tax assets - long-term: | ||||||||
| Net operating loss carryforwards | 5,774,160 | 5,733,902 | ||||||
| Amortization | 20,914 | 16,851 | ||||||
| Total deferred income tax assets | 5,979,878 | 5,879,874 | ||||||
| Valuation allowance | (5,979,878 | ) | (5,879,874 | ) | ||||
| Total | $ | – | $ | – | ||||
A reconciliation of provision (benefit) for income taxes provided at the federal statutory rate to actual provision for income taxes is as follows for the years ended December 31:
| 2016 | 2015 | |||||||
| Benefit (provision) for income taxes computed at federal statutory rate | $ | 104,386 | $ | 194,720 | ||||
| State income taxes, net of federal benefit | 39 | 43 | ||||||
| Other | (64,128 | ) | (143,559 | ) | ||||
| Valuation allowance | (39,002 | ) | (49,934 | ) | ||||
| Provision for Income taxes | $ | 1,295 | $ | 1,270 | ||||
| Effective tax rate | -0.48% | -0.25% | ||||||
As of December 31, 2016, the Company had net operating loss carry-forwards for federal income tax reporting purposes of approximately $14.8 million that may be offset against future taxable income through 2036. The Company has state net operating loss carry-forwards of $5.1 million that may be offset against future taxable income through 2029. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance that the carry-forwards will expire unused. Accordingly, the potential tax benefits of the loss carry-forwards are offset by a valuation allowance of the same amount.
The Company files income tax returns in the U.S. federal and Utah jurisdictions. Tax years 2012 to current remain open to examination by U.S. federal and state tax authorities.