NOTE

15.

INCOME TAXES

The provision for federal and state income taxes for the years ended

December 31, 2019

and

2018

included the following:

	2019			2018
Current benefit (provision):
Federal	$	—		$	—
State		—			—
Deferred benefit:
Federal		1,097,146			1,262,452
State		95,202			322,027
Valuation allowance		(1,192,348	)		(1,584,479	)
Total income tax provision	$	—		$	—

Deferred tax assets and liabilities reflect the net effect of temporary differences between the carrying amount of assets and liabilities used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at

December 31, 2019

and

2018

are as follows:

	2019			2018
Deferred tax assets:
Carrying value differences	$	232,030		$	498,863
Net operating loss carryforward		2,927,848			1,333,361
Tax credits		6,250			6,250
Other		—			—
Subtotal		3,166,128			1,838,474
Valuation allowance		(2,732,064	)		(1,539,716	)
Net deferred tax assets		434,064			298,758
Deferred tax liabilities:
Net unrealized gains on appreciated investments		(434,064	)		(298,758	)
Net deferreds	$	—		$	—

GAAP provides for the recognition of deferred tax assets if realization of such assets is more likely than

not.

Based on the weight of available evidence, which includes the Company’s historical operational performance and the reported cumulative losses in the

three

-year period preceding

2019,

the Company has provided a full valuation allowance against its net deferred tax assets. The deferred tax liability results from gains on appreciated investments that are realized for financial accounting purposes but

not

for tax purposes.

As of

December 31, 2019,

the Company had federal net operating loss carryforwards of approximately

$11.8

million

and state net operating loss carryforwards of approximately

$10.0

million

. These carryforwards will expire in various amounts beginning in

2032.

Internal Revenue Code Section

382

limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership of a company. The Company believes that an ownership change did occur in

August 2016.

Net operating losses that arose prior to that ownership change will have limited availability to offset taxable income arising in periods following the ownership change.

The Company is required to recognize in the financial statements the impact of a tax position, if that position is

not

more likely than

not

of being sustained on audit, based on the technical merits of the position. The Company’s policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. The unrecognized tax benefit wa

s of

December 31, 2019.

The Company does

not

expect that its uncertain tax positions will materially change in the next

months.

liability related to uncertain tax positions is recorded on the financial statements related to uncertain tax positions.

The Company operates in various tax jurisdictions and is subject to audit by various tax authorities. To the extent of the Company’s tax loss carryovers, the Company’s federal and state tax returns will be subject to examination by the tax authorities from the earliest years in which such tax attributes arise. While the amount of those tax loss carryovers continues to be subject to adjustment, any assessment of additional tax for those prior years is generally barred, except for the

three

most recent years (federal) or

four

most recent years (state). Tax contingencies are based upon their technical merits, relative law, and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies.