Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Taxes

NOTE 10—TAXES

The following table sets forth a reconciliation of the statutory federal income tax for the years ended December 31, 2018 and 2017.

	2018			2017
Income (loss) before income taxes	$	(251,336	)	$	(2,037,615	)
Income tax expense (benefit) computed at statutory rates	$	(52,781	)	$	(713,165	)
Permanent differences, nondeductible expenses		405			5,371
Increase (decrease) in valuation allowance		(1,386,204	)		(7,283,514	)
State and Local Taxes		6,548			—
Other adjustment		1,090,595			44,279
Deferred True-Up		341,437			—
Federal tax rate change		—			7,947,029
Tax provision	$	—		$	—
Total provision
Foreign	$	—		$	—
Total provision (benefit)	$	—		$	—

For years beginning January 1, 2018, the Tax Cuts and Jobs Act (“the Act”) includes significant changes to the U.S. corporate income tax system including the reduction of the corporate tax rate from 35% to 21%.

At December 31, 2018 the Company has a federal tax loss carry forward of $53,001,669 and a foreign tax credit carry forward of $505,745, both of which have been fully reserved.

The tax effects of the temporary differences between financial statement income and taxable income are recognized as a deferred tax asset and liabilities. Significant components of the deferred tax asset and liability as of December 31, 2018 and 2017 are set out below.

	2018			2017
Non-Current Deferred tax assets:
Net operating loss carry forward	$	11,128,619		$	11,130,350
Foreign tax credit carry forward		505,745			505,745
Deferred state tax		13,966			13,966
Stock compensation		471,534			1,891,857
Book in excess of tax depreciation, depletion and capitalization methods on oil and gas properties		(883,220	)		(919,070	)
Other		(196,560	)		(196,560	)
Colombia future tax obligations		—			—
Total Non-Current Deferred tax assets		11,040,084			12,426,288
Valuation Allowance		(11,040,084	)		(12,426,288	)
Net deferred tax asset	$	—		$	—

Schedule of Net Operating Loss Carryforwards

We are currently subject to a three-year statute of limitation for federal tax purposes and, in general, three to four-year statute of limitation for state tax purposes. State NOL expiration will occur beginning in 2019 and Federal NOL expiration will begin in 2035.

Under the Tax Cuts and Jobs Act of 2017, net operating losses incurred for tax years beginning after 12/31/2017 will have no expiration date but utilization will be limited to 80% of taxable income. For losses generated prior to 1/1/2018, there will be no limitation on the utilization, but there is an expiration on the carryforward of 20 years for federal tax purposes.

Foreign Income Taxes

The Company owns direct ownership in several properties in Colombia operated by Hupecol. Colombia’s current income tax rate is 25%. During 2018 and 2017, we recorded no foreign tax expense.

Effect of New Federal Tax Reform Legislation

New tax reform legislation was enacted on December 22, 2017, known as the Tax Cuts and Jobs Act of 2017 (“The Act”). The Act moved from a worldwide tax system to a quasi-territorial tax system and was comprised of broad and complex changes to the U.S. tax code including, but not limited to, (1) reduced the U.S. tax rate from 35% to 21%; (2) added a deemed repatriation transition tax on certain foreign earnings and profits; (3) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries; (4) included certain income of controlled foreign companies in U.S. taxable income (“GILTI”); (5) created a new minimum tax referred to as a base erosion anti-abuse income tax; (6) limited certain U.S. Federal research based credits; and (7) eliminated the domestic manufacturing deduction. The accounting for the reduction of deferred tax ass and the tax charge for the deemed repatriation transition tax is complete as of December 31, 2018, which resulted in no material changes from the Company’s preliminary assessment.