|12 Months Ended|
Dec. 31, 2019
|Income Tax Disclosure [Abstract]|
NOTE H— INCOME TAXES
Income taxes are provided for temporary differences between financial and tax bases of assets and liabilities. The following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pre-tax loss with the benefit from income taxes for the years ended December 31, 2015, 2016, 2017, 2018 and 2019:
The components of deferred tax assets and liabilities are as follows at December 31, 2015, 2016, 2017, 2018 and 2019, using a combined deferred income tax rate of 40% for 2015 and 2016 and 28% for 2017, 2018 and 2019:
The provisions for income taxes for the years ended December 31, 2019 and 2018 through 2016 are as follows:
A reconciliation of the federal statutory tax rate to the effective tax rate is as follows:
The company uses the asset-liability method of computing deferred taxes in accordance with FASB ASC Topic 740.
The difference between the effective tax rate and the statutory tax rates is due primarily to the impact of the valuation allowance resulting in zero tax provision being recorded.
Tax law changes enacted in 2018 reduced the statutory federal rate from 34% to 21%. The deferred tax asset has been reduced to reflect the newly enacted rate, and was equally offset by the change in valuation allowance.
At December 31, 2019 and 2018 through 2015, the deferred income tax assets consisted of the following:
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. The majority of the balance is due deferred compensation, share based payments, the fair value of derivatives, and to continued losses resulting in NOL carryforwards, which may not be realized in future periods. As such, the company has recorded a 100% valuation allowance against the deferred tax assets.
At December 31, 2019 and 2018 through 2015, the deferred income tax assets consisted of the following temporary differences:
At December 31, 2019 through 2015, the Company has federal net operating loss carryforwards of approximately:
Net operating losses begin to expire in the year ending 2021 through 2029.
Inasmuch as it is not possible to determine when or if the net operating losses will be utilized, a valuation allowance has been established to offset the benefit of the utilization of the net operating losses.
As of December 31, 2019, the Company had available net operating losses of approximately $21.2 million which can be utilized to offset future earnings of the Company. The utilization of the net operating losses is dependent upon the tax laws in effect at the time such losses can be utilized. The loss carryforwards expire between the years 2021 and 2037. Should the Company experience a significant change of ownership, the utilization of net operating losses could be reduced.
The Company and its subsidiaries file tax returns in the U.S. Federal jurisdiction and, in the state of California. The Company is no longer subject to U.S. federal tax examinations for tax years before and including December 31, 2015. The Company is no longer subject to examination by state tax authorities for tax years before and including December 31, 2015. During the years ended December 31, 2016, 2017, 2018 and 2019, the Company did not recognize interest and penalties.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef