8. INCOME TAXES

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The Act lowered the Company’s U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018.

The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015.

Included in the balance at September 30, 2020, are no tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the period ended September 30, 2020, the Company did not recognize interest and penalties.

At September 30, 2020, the Company had net operating loss carry-forwards of approximately $26,921,000 that may be offset against future taxable income from the year 2020 through 2039. No tax benefit has been reported in the September 30, 2020 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Net operating loss carryforwards may be limited as to use in future years.

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rate of 30% to pretax income from continuing operations for the years ended September 30, 2020 and 2019 due to the following:

	9/30/2020			9/30/2019
Book Income	$	(1,421,730	)	$	703,120
Nondeductible Other Expenses		307,780			(642,915	)
Depreciation		-			90
Related party accrual		(1,510	)		-
Valuation Allowance		1,115,460			(60,295	)
Income Tax Expense	$	-		$	-

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of September 30, 2020 and 2019:

	9/30/2020			9/30/2019
Deferred Tax Assets:
NOL Carryforward	$	5,653,390		$	6,452,745
Capital Loss Carryforward		5,323			-
R&D Carryforward		46,147			46,150
Related Party Accruals		-			2,160

Deferred Tax Liabilities:
Depreciation		-			(10	)

Valuation Allowance		(5,704,860	)		(6,501,045	)
Net Deferred Tax Asset	$	-		$	-