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16. INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
INCOME TAXES | There was no Federal income tax expense for the years ended December 31, 2017 and 2016 due to the Company’s net losses. Income tax expense represents minimum state taxes due. The blended Federal and State tax rate of 39.83% applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 34% to loss before taxes), as follows:
|  | Year ended December 31, |
|  | 2017 |  |  | 2016 |
Computed “expected” tax expense (benefit) |  | $ | (1,034,086 | ) |  | $ | (895,395 | )
State taxes, net of federal benefit |  |  | (171,202 | ) |  |  | (154,764 | )
Goodwill impairment and other non-deductible items |  |  | 643,016 |  |  |  | (31,134 | )
Change in federal tax rates |  |  | 4,145,380 |  |  |  | – |
Change in deferred tax asset valuation allowance |  |  | (3,583,108 | ) |  |  | 1,081,293 |
Income tax expense |  | $ | – |  |  | $ | – |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31 are as follows:
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Charitable contributions |  | $ | 2,900 |  |  | $ | 4,128 |
Reserve for bad debt |  |  | 17,948 |  |  |  | 25,548 |
Stock options |  |  | 3,416,792 |  |  |  | 4,776,104 |
Depreciation |  |  | 6,920 |  |  |  | 33,638 |
Other |  |  | 17,674 |  |  |  | 25,159 |
Net operating loss carryforward |  |  | 6,957,507 |  |  |  | 9,167,042 |
Total gross deferred tax assets |  |  | 10,419,741 |  |  |  | 14,031,619 |
Less: Deferred tax asset valuation allowance |  |  | (10,351,807 | ) |  |  | (13,934,915 | )
Total net deferred tax assets |  |  | 67,934 |  |  |  | 96,704 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Accrued salaries |  |  | (67,934 | ) |  |  | (96,704 | )
Total deferred tax liabilities |  |  | (67,934 | ) |  |  | (96,704 | )
Total net deferred taxes |  | $ | – |  |  | $ | – |
As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established. The valuation allowance at December 31, 2017 was $10,351,807. The decrease in the valuation allowance during 2017 was $3,583,108. At December 31, 2017, the Company has a net operating loss carry forward of $24,862,803 available to offset future net income through 2037. The NOL expires during the years 2017 to 2037. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred. On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (Act). The Act makes significant modifications to the provisions of the Internal Revenue Code, including but not limited to, a corporate tax rate decrease to 21% effective as of January 1, 2018. The Company’s net deferred tax assets and liabilities have been revalued at the newly enacted U.S. Corporate rate in the year of enactment. The adjustment related to the revaluation of the deferred tax asset and liability balances is a net charge of approximately $4.1 million. This expense is fully offset by a change in valuation allowance. Accordingly, there is no impact on income tax expense as of December 31, 2017.

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- 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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