Annual report pursuant to Section 13 and 15(d)

NOTE 15: INCOME TAXES

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NOTE 15: INCOME TAXES
12 Months Ended
Dec. 31, 2018
Notes  
NOTE 15: INCOME TAXES

NOTE 15: INCOME TAXES

 

The Company utilizes ASC 740 “Income Taxes”, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

The U.S tax reform bill that Congress voted to approve December 20, 2017, also known as the “Tax Cuts and Jobs Act”, made sweeping modification to the Internal Revenue Code, including a much lower corporate tax rate, changes to credits and deductions, and a move to a territorial system for corporations that have overseas earnings. The Act replaced the prior law graduated corporate tax rate, which taxed income over $10 million at 35%, with a flat rate of 21%.

 

For the year ended December 31, 2018, the Company had available for U.S federal income tax purposes net operating loss carryovers of approximately $6,560,000, which will expire on various dates in the next twenty (20) years. The net operating loss carryovers may be subject to limitations under Internal Revenue Code section 382, due to significant changes in the Company’s ownership. If a change of ownership has occurred the net operating loss carryovers would be limited or might be eliminated.

 

The provision for income taxes differ from the amount of income tax determined by applying the applicable U.S statutory rate to losses before income tax expense for the period ended December 31, 2018 and 2017 as follows:

 

 

2018

 

2017

Statutory federal income tax rate

21.00%

 

34.00%

Statutory state and local income tax rate (8.25%), net of federal benefit

5.40%

 

5.40%

Change in valuation allowance

(26.40%)

 

(26.40%)

Effective tax rate

0.00%

 

0.00%

 

Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset result principally from the following:

 

 

 

2018

 

2017

Deferred tax assets:

 

 

 

 

Net operating loss carry forward

$

3,177,346

$

2,485,629

Less: valuation allowance

 

(3,177,346)

 

(2,485,629)

Net deferred tax asset

$

-

$

-

 

The valuation allowance for deferred tax assets as of December 31, 2018 and 2017 was $3,177,346 and $2,485,629, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company will continue to monitor the potential utilization of this asset. Should factors and evidence change to aid in this assessment, a potential adjustment to the valuation allowance in future periods may occur. Management believes it is more likely than not that the Differed tax asset will not be realized, so a 100% Valuation Reserve has been established at December 31, 2018.