Note 7 - Income Taxes

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 7. Income Taxes

Deferred tax assets and liabilities are recorded based on the difference between financial reporting and tax basis of assets and liabilities and are measured by the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Deferred tax assets are computed with the presumption that they will be realizable in future periods when taxable income is generated. Predicting the ability to realize these assets in future periods requires judgment by management. U.S. generally accepted accounting principles prescribe a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Income tax benefits that meet the “more likely than not” recognition threshold are recognized.

The Company has recognized a net deferred tax asset of approximately $1.5 million and has recorded a valuation allowance of approximately $5.2 million against the other deferred tax assets. The Company reviews the assessment of the deferred tax asset and valuation allowance on an annual basis or more often when events indicate that a change to the valuation allowance may be warranted.

At  December 31, 2021, the Company had available net operating loss carryforwards of approximately $29.5 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. 

Net operating loss carryforwards totaling $10.7 million expired in 2021. The schedule below outlines when the Company's pre-2017 net operating losses were generated and the year they  may expire.

Tax Year End	NOL		Expiration
2002	$	9,109,774		2022
2004		1,621,096		2024
2005		1,788,157		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	$	20,041,484

Effective for tax years ending in 2018, net operating losses can be carried forward to future years indefinitely. Net operating losses generated in 2018 and later total $9,413,692. The below table outlines our net operating losses generated in 2018 and after.

Tax Year End	NOL
2018	$	4,410,916
2019		2,730,461
2020		2,272,315
Total	$	9,413,692
Total loss carryforwards	$	29,455,176

Management is not aware of any tax positions that would have a significant impact on the Company’s financial position.