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:



	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	10,753,000		$	9,504,000
Depreciation and amortization	668,000			494,000
Non-cash compensation	(69,000		)	270,000
Other	46,000			28,000
Valuation Allowance	(10,004,000		)	(8,902,000		)
Deferred tax asset	$	1,394,000		$	1,394,000

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, 2019 and 2018 is warranted. If applicable, the Company would recognize interest expense and penalties related to uncertain tax positions in interest expense. As of December 31, 2019, 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 $51.2 million. Net operating loss carryforwards prior to 2017 are available to offset taxable income of future periods and begin to expire in 2021. 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. Approximately $0.1 million of the total net operating loss is subject to an IRS Section 382 limitation from 1999.

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



	2019		2018
Current provision:
Federal	$	—	$	—
State	101,888		77,780
	101,888		77,780

Deferred provision:
Federal expense	—		—

Expense for income taxes	$	101,888	$	77,780

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:



	2019			2018
Income tax (benefit) at 21%	$	(1,074,000	)	$	(793,000	)
Change in valuation allowance	1,102,000			(659,000		)
Permanent and other differences	(28,000		)	1,452,000
Deferred tax impact of enacted tax rate and law changes	—			—
Alternative minimum tax and state taxes	101,888			77,780

Income tax expense	$	101,888		$	77,780