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Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 9. Income Taxes

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

 

Significant components of the Company’s deferred tax asset are as follows at December 31:

 

  

2023

  

2022

 
         

Deferred tax assets:

        

Net operating loss carryforwards

 $4,686,000  $5,024,000 

Depreciation and amortization

  1,137,000   1,159,000 

Non-cash compensation

  1,649,000   (117,000)

Other

  124,000   69,000 

Total

  7,596,000   6,135,000 

Valuation Allowance

  (6,092,000)  (4,631,000)

Deferred tax asset

 $1,504,000  $1,504,000 

 

Management has reviewed its net deferred asset position, and due to the history of operating losses has determined that the application of a valuation allowance at December 31, 2023 and 2022 is warranted. If applicable, the Company would recognize interest expense and penalties related to uncertain tax positions in interest expense. As of December 31, 2023, the Company had not accrued any interest or penalties related to uncertain tax provisions.

 

The Company has net operating loss carryforwards for tax purposes of approximately $23.3 million. Net operating loss carryforwards prior to 2017 are available to offset taxable income of future periods and expire 20 years after the loss was generated. The schedule below outlines when our pre-2017 net operating losses were generated and the year they may expire.

 

Tax Year End

 

NOL

  

Expiration

 

2005

 $1,768,851   2025 

2006

  1,350,961   2026 

2007

  1,740,724   2027 

2008

  918,960   2028 

2009

  835,322   2029 

2010

  429,827   2030 

2013

  504,862   2033 

2016

  474,465   2036 

2017

  1,267,336   2037 

Total

 $9,291,308     

 

Effective for tax years ending in 2018 or later, net operating losses cannot be carried back but can be carried forward to future tax years indefinitely, subject to annual limitations for utilization. Net operating losses generated in 2018 and later total approximately $13,023,000.

 

The tax provision for federal and state income tax is as follows for the years ended December 31:

 

  

2023

  

2022

 
         

Current provision:

        

Federal

 $—  $— 

State

  292,524   280,000 
   292,524   280,000 
         

Deferred provision:

        

Federal expense (benefit)

  —   — 
         

Expense for income taxes

 $292,524  $280,000 

 

The reconciliation of federal income tax computed at the U.S. federal statutory tax rates to total income tax expense is as follows for the years ended December 31:

 

  

2023

  

2022

 
         

Income tax (benefit) at 21%

 $(99,772) $(1,134,200)

Change in valuation allowance

  (1,361,228)  (581,000)

Permanent and other differences

  1,461,000   1,715,200 

Federal income tax (benefit)

  —   — 

State taxes

  292,524   280,000 
         

Income tax expense

 $292,524  $280,000