NOTE 6 - INCOME TAXES

12 Months Ended

Mar. 31, 2020

Notes

NOTE 6 - INCOME TAXES

NOTE 6 INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S. corporate income tax law, was signed into law by President Trump. The TCJA contains significant changes to corporate income taxation, including but not limited to the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the orphan drug tax credit and changes to the deductibility of research and experimental expenditures that will be effective in the future).

The Company had no income tax provision for the years ended March 31, 2020 and 2019 because the Company had net operating losses for both federal and state tax purposes. The net operating loss carryovers may be subject to annual limitations under Internal Revenue Code Section 382/383, and similar state provisions, should there be a greater than 50% ownership change as determined under the applicable income tax regulations. The amount of the limitation would be determined based on the value of the company immediately prior to the ownership change and subsequent ownership changes could further impact the amount of the annual limitation or eliminate them entirely. An ownership change pursuant to Section 382/383 may have occurred in the past or could happen in the future, such that the NOLs available for utilization could be significantly limited or eliminate them entirely.

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

	For the years ended March 31
	2020		2019
Tax benefit at federal statutory rate	(21.0)	%	(21.0)	%
State income taxes, net of federal benefit	(8.0)	%	(5.5)	%
Permanent differences	-	%	-	%
Change in valuation allowance	29.0	%	26.5	%
Effective income tax rate	-	%	-	%

The Company has determined that a valuation allowance for the entire net deferred tax asset is required. A valuation allowance is required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset will not be realized. After consideration of all the evidence, management has determined that a full valuation allowance is necessary to reduce the deferred tax asset to zero.

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:

		For the years ended March 31
		2020		2019
Net operating loss carryforwards	$	5,051,328	$	6,304,297
Current year losses		773,399		230,107
Permanent differences		-		-
Gross deferred tax assets	$	5,824,727	$	6,534,404
Valuation allowance		(5,824,727)		(6,534,404)
Deferred tax asset, net of valuation allowance	$	-	$	-

At March 31, 2020 and 2019, the Company had net operating loss carry forwards for federal and state income tax purposes of approximately $5.8 million and $6.5 million, respectively. These loss carryforwards expire within fifteen to twenty years of the respective tax years and may be used to offset future taxable income through 2039.

The TCJA, also introduces a limitation on the amount of NOLs that a corporation may deduct in a single tax year under section 172(a) equal to the lesser of the available NOL carryover or 80 percent of a taxpayer’s pre-NOL deduction taxable income (the “80-percent limitation”). This limitation applies only to losses arising in tax years that begin after Dec. 31, 2017 based upon section 172(e)(1) of the amended statute.

The CARES Act repeals the 80% income limitation for NOL carryovers that can be deducted in tax years beginning before January 1, 2021.  It also provides that for any taxable year beginning after December 31, 2020, the 80% limitation on taxable income equals 80% of the excess of taxable income over the amount of pre-TCJA NOLs carried to such year, clarifying an interpretive issue that had arisen under the TCJA text.

The utilization of the net operating loss carry forwards is dependent upon the ability to generate sufficient taxable income during the carry forward period. In addition, utilization of these carry forwards may be limited due to ownership changes rules, as defined in the Internal Revenue Code 382/383. The Company has not determined if an ownership change has occurred that would limit the use of the net operating losses or eliminate them entirely.

The Company’s tax returns are subject to examination by tax authorities beginning with the year ended March 31, 2015 (or the tax year ended March 31, 2013 if the Company were to utilize its NOLs).