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Income Taxes
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
Income Taxes

 

10. Income Taxes

  

The Company recorded a state and federal tax provision of $105,610 for 2011, a deferred income tax benefit of $493,000 for 2010, and did not recognize a tax provision or benefit for 2009. (The following table is only for two years since it relates to balance sheet accounts.) 

 At December 31, 2011, 2010 and 2009, the Company had net deferred tax assets as follows: 

 

    2011   2010  
  Differences in the book and tax basis of        
  properties, plants and equipment  $     79,164    $   28,000  
  Other           2,926   -  
  Limitation in deduction of foreign        
  exploration costs       249,309         256,000  
  Foreign net operating loss carryforward 390,000   210,000  
  Federal net operating loss carryforward         65,159         698,000  
  Total deferred tax assets       786,558      1,192,000  
 

 

Valuation allowance (foreign)

 (390,000)   (210,000)  
  Valuation allowance (federal)                 -      (489,000)  
  Net deferred tax assets  $   396,558    $   493,000  

 

The deferred tax assets were calculated based on an estimated 38.5% combined federal and state income tax rate for 2011, and an estimated 34% income tax rate for 2010 and 2009. Existing and forecasted pretax earnings for financial reporting purposes are sufficient to generate the estimated required future taxable income required to realize the recognized (federal) net deferred tax asset as of December 31, 2011. 

At December 31, 2011, the Company had unexpired federal regular tax net operating loss carryforwards of approximately $170,000, which expire between 2026 and 2029. In addition, the Company has unexpired Montana state net operating loss carryforwards of $20,000 which expire between 2013 and 2016 and approximately $1.3 million in Mexico which expires between 2019 and 2021. 

The income tax provision (benefit) differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income (loss) for the years ended December 31, 2011, 2010 and 2009 due to the following: 

 

  2011 2010 2009
Computed expected tax provision (benefit) $     252,460 34.0% $  106,000 34.0% $(99,000) (34%)
             
Effect of permanent differences 4,662 0.6% 30,000 9.6% 23,000 7.9%
Foreign taxes 24,000 3.2% - - - -
Other (1) 133,488 118% - - - -
Increase in valuation allowance - - - - 76,000 26.1%
Release in valuation allowance (309,000) (142%) (629,000) (202%) - -
  $     105,610 13.9% $ (493,000) (158%) $            - -

 

(1)   Rate differential as management has refined their estimate to 38.5% currently 

 During the years ended December 31, 2011, 2010, and 2009, there were no material uncertain tax positions taken by the Company. The Company has determined that it is subject to examination of our income tax filings in the United States jurisdictions for the 2008 through 2011 tax years, and 2010 and 2011 in Mexico. In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.