INCOME TAXES |
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INCOME TAXES |
NOTE 13 – INCOME TAXES The effective tax rate was 0.9% and 0% for the years ended December 31, 2021 and 2020, respectively. The effective tax rate differs from the federal tax rate of 21% for the year ended December 31, 2021 and 2020 due primarily to the full valuation allowance and other discrete items. Reconciliation between the effective tax rate on loss before provision for income taxes and the statutory tax rate is as follows:
NOTE 13 – INCOME TAXES (CONTINUED) At December 31,2021 and 2020, the Company had federal and state net operating losses (“NOLs”) in the amount of $10,687,462 and $11,173,080, respectively. These NOLs expire from 2031 to 2041 or have indefinite lives as follows. However, the Tax Cuts & Jobs Act of 2017 limits the amount of net operating loss utilized each year after December 31, 2020 to 80% of taxable income.
The Company is in process of evaluating the effects that a change in ownership under Internal Revenue Code Section 382, may limit the potential utilization of its NOLs going forward. Temporary differences which give rise to a significant portion of deferred tax assets are as follows at:
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2021, a valuation allowance of $4,468,123 has been recorded to recognize the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. The Company and its subsidiaries income tax returns for 2019 and 2020 are open to review by the tax authorities. |