Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 9. 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:

	2022			2021
Deferred tax assets:
Net operating loss carryforwards	$	5,024,000		$	5,942,000
Depreciation and amortization		1,159,000			999,000
Non-cash compensation		(117,000	)		(326,000	)
Other		69,000			101,000
Total		6,135,000			6,716,000
Valuation Allowance		(4,631,000	)		(5,212,000	)
Deferred tax asset	$	1,504,000		$	1,504,000

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, 2022 and 2021 is warranted. If applicable, the Company would recognize interest expense and penalties related to uncertain tax positions in interest expense. As of December 31, 2022, 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 $23.9 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. The Net operating loss carryforward that expired in 2022 was in the amount of $9.1 million. The schedule below outlines when our pre-2017 net operating losses were generated and the year they may expire.

Tax Year End	NOL		Expiration
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	$	10,931,710

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. Net operating losses generated in 2018 and later total approximately $12,994,000.

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

	2022		2021
Current provision:
Federal	$	—	$	—
State		280,000		279,861
		280,000		279,861
Deferred provision:
Federal expense (benefit)		—		(110,000	)
Expense for income taxes	$	280,000	$	169,861

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:

	2022			2021
Income tax (benefit) at 21%	$	(1,134,200	)	$	(67,543	)
Change in valuation allowance		(581,000	)		(2,322,000	)
Permanent and other differences		1,715,200			2,389,543
Federal income tax (benefit)		—			(110,000	)
State taxes		280,000			279,861
Income tax expense	$	280,000		$	169,861