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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
INCOME TAXES |
INCOME TAXES | 10. INCOME TAXES The provision (benefit) for income taxes consists of the following:
|  | For the Years Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Current tax provision (benefit) |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | (13,318) |  | $ | —
State |  |  | 7,875 |  |  | — |  |  | 848
Total current provision (benefit) |  |  | 7,875 |  |  | (13,318) |  |  | 848
Deferred tax provision (benefit) |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  | — |  |  | (188,456)
State |  |  | — |  |  | — |  |  | —
Total deferred tax provision (benefit) |  |  | — |  |  | — |  |  | (188,456)
Total income tax provision (benefit) |  | $ | 7,875 |  |  | (13,318) |  | $ | (187,608)
The Company has $23.3 million in tax benefits attributable to net operating losses for federal tax purposes. $21.5 million net operating losses were generated before January 1, 2018 and begin to expire in 2028 for federal tax purposes. $1.8 million of net operating losses were generated after January 1, 2018 and have an indefinite carryover period. The Company has state net operating losses of $24.8 million which will begin to expire in January 2021. The Company also has credits for alternative minimum taxes (“AMT”) paid of $100 thousand as of December 31, 2019. The alternative minimum tax was repealed with the enactment of the Act. AMT credits carried over may be used to offset regular tax liability for any tax year. Any unused credits are 50% refundable for tax years 2018-2020, and 100% refundable for tax years beginning 2021. The Company has recorded the AMT credit as a tax receivable on its financial statements rather than as a deferred tax asset, as this amount is a refundable credit. Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:
|  | December 31,
|  | 2019 |  | 2018
Deferred tax assets |  |  |  |  |  |
Net operating loss carry forwards |  | $ | 5,748,724 |  | $ | 6,668,238
Accrued expenses and reserves |  |  | 573,382 |  |  | 436,627
Employee stock option expense |  |  | 75,591 |  |  | 76,150
Nonemployee stock option expense |  |  | 8,207 |  |  | 8,268
Inventory |  |  | 110,455 |  |  | 132,114
Impairment |  |  | 111,178 |  |  | —
Unrealized Gain/Loss |  |  | 30,434 |  |  | 112,000
Deferred tax assets |  |  | 6,657,971 |  |  | 7,433,397
Deferred tax liabilities |  |  |  |  |  |
Property and equipment |  |  | (1,628,133) |  |  | (1,281,999)
Deferred tax liabilities |  |  | (1,628,133) |  |  | (1,281,999)
Net deferred assets |  |  | 5,029,838 |  |  | 6,151,398
Valuation allowance |  |  | (5,029,838) |  |  | (6,151,398)
Net deferred tax assets |  | $ | - |  | $ | —
Utilization of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Deferred income tax calculations reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss carry forwards, and are stated at the U.S. tax rate of 21% beginning in 2018. Net operating losses incurred after December 31, 2017 can only offset 80% of taxable income. However, these net operating losses may be carried forward indefinitely instead of limited to twenty years under previous tax law. Carrybacks of these losses are no longer permitted. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. The Company has fully reserved these future tax deductions. The valuation allowance decreased by $1,121,560 for 2019 and increased by and $325,444 for 2019 and 2018 respectively. A reconciliation of income taxes based on the federal statutory rate and the effective income tax rate is summarized as follows:
|  | December 31, |
|  | 2019 |  | 2018 |  | 2017 |
Income tax at the federal statutory rate |  | 21.0 | % | 21.0 | % | 35.0 | %
State tax, net of federal tax |  | 2.0 |  | 3.5 |  | 2.9 |
Change in valuation allowance |  | (35.6) |  | (24.3) |  | 85.9 |
Permanent differences |  | — |  | (0.3) |  | 5.7 |
Return-to-provision and other |  | 12.9 |  | — |  | (37.6) |
Tax Reform and Jobs Act tax rate change |  | — |  | 0.1 |  | (81.1) |
Incentive stock options |  | — |  | — |  | (6.0) |
Effective tax rate |  | 0.3 | % | — | % | 4.8 | %
The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions. The Company’s federal income tax returns for all tax years ended on or after December 31, 2016, remain subject to examination by the Internal Revenue Service. The Company’s state and local income tax returns are subject to examination by the respective state and local authorities over various statutes of limitations, most ranging from three to five years from the date of filing.

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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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