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Income Taxes

12 Months Ended

Dec. 31, 2020

NOTE 9 – INCOME TAXES

As of December 31, 2020, the Company has approximately $10.7 million of operating loss carryforwards for federal income tax reporting purposes that may be applied against future taxable income. Portions of the net operating loss carryforwards will begin to expire in the year 2021 if not utilized prior to that date, expiring during various year through 2038. There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. The net operating loss carryforwards could be subject to limitation in any given year in the event of a change in ownership as defined by IRC Section 382.

The valuation allowance overall increased by approximately $1,269,000 and $148,000 during the year ended 2020 and 2019, respectively. The Company has fully reserved the deferred tax asset resulting from available net operating loss carryforwards.

The income tax provision charged to continuing operations for the years ended December 31, 2020 and 2019 was as follows:

	December 31,
	2020			2019
Current:
U.S. federal	$	152,100		$	(152,100	)
State and local		40,400			(40,400	)
	$	192,500		$	(192,500	)

Deferred:
U.S. federal		(70,000	)		70,000
State and local		-			-
	$	(70,000	)	$	70,000

Provision for income taxes		122,500			(122,500	)

The provision for income taxes differs from the expected amount of income tax expense (benefit) determined by applying a combined U.S. federal and state (Puerto Rico) income tax rate of 25% to pretax income (loss) for the years ended December 31, 2020 and 2019 as follows:

	December 31,
	2020			2019
Computed “expected” tax expense (benefit)	$	(12,684,000	)	$	(783,000	)
Increase (decrease) in income taxes resulting from:
Permanent differences		7,765,000			7,000
Apportionment of Puerto Rico income		3,607,000			380,000
Nondeductible expenses		140,000			173,000
Change in valuation allowance		1,269,000			148,000
Other		25,500			(47,500	)
	$	122,500		$	(122,500	)

Net deferred tax liabilities consist of the following components as of December 31, 2020 and 2019:

	December 31,
	2020			2019
Deferred tax Liability:
Other	$	-		$	70,000
		-			70,000
Deferred tax assets:
Stock-based compensation		716,000			716,000
Temporary differences		113,000			44,000
Net operating loss carryforwards		2,151,000			951,000
		2,980,000			1,711,000
Less valuation allowance		(2,980,000	)		(1,711,000	)

- Definition

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.

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