Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 9 – INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted to significantly reform the Internal Revenue Code of 1987, as amended (the “IRC”). The TCJA, among other things, contains significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, effective as of January 1, 2018; a limitation of the tax deduction for interest expense; a limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such tax losses may be carried forward indefinitely); and modifying or repealing many business deductions and credits.

The Company has significant business interest expense; however, the TCJA provision implementing a limitation of the tax deduction for interest expense does not apply to the Company as it qualifies for the small business exemption. On the 2019 and 2020 tax return, the company elected to take 100% bonus depreciation deduction available under the new TCJA tax legislation, which applied to qualified property placed in service after September 27, 2017 and before January 1, 2023. This large deduction increased our deferred tax liability and increased our NOL significantly.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, supersedes the changes related to NOLs from TCJA and permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. After December 31, 2020, the limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks are reenacted.

The Company’s VIEs are single member LLCs. As single member LLCs, these entities are considered disregarded for income tax purposes and are not included in the Company’s tax return. Therefore, the VIEs are not included in the tax information presented below.

As of December 31, 2021 and 2020, the Company had net deferred tax assets principally arising from the net operating loss carry forwards for income tax purposes multiplied by the Federal statutory tax rate of 21%. As management of the Company cannot determine that it is more likely than not that we will realize the benefit of the deferred tax assets, a valuation allowance equal to the deferred tax asset has been established at December 31, 2021 and 2020.

As of December 31, 2021, and 2020, the Company had Federal net operating loss carryforwards of approximately $19,257,499 and $18,446,935, respectively. The change in the valuation allowance for the years ended December 31, 2021 and 2020 was $1,352,630 and $2,364,875, respectively. The provision to return true up adjustment primarily related to a depreciation true up on the 2020 return.

The significant components of the current income tax benefit at December 31, 2021 and 2020 were as follows:

	For the Years Ended
	December 31, 2021			December 31, 2020
Statutory rate applied to income (loss) before income taxes	$	(383,885	)	$	(1,068,482	)
Increase (decrease) in income taxes results from:
VIE income		112,958			451,876
Change in valuation allowance		(1,352,630	)		2,364,876
Provision to return true up		1,623,557			(1,748,270	)
Income tax expense (benefit)	$	-		$	-

The difference between income tax expense computed by applying the federal statutory corporate tax rate and provision for actual income tax is as follows:

	For the Years Ended
	December 31, 2021			December 31, 2020
Income tax benefit at		21.00	%		21.00	%
Income tax benefit - State		3.62	%		3.63	%
VIE income		-7.25	%		-10.42	%
Change in valuation allowance		86.77	%		26.09	%
Provision to return true up		-104.14	%		-40.30	%
Income tax expense (benefit)		0.00	%		0.00	%

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The effects of temporary differences that gave rise to net deferred tax assets are as follows:

	For the Years Ended
	December 31, 2021			December 31, 2020
Deferred tax liabilities:
Depreciation	$	(2,431,793	)	$	(761,455	)
Amortization expense		(14,372	)		(269,076	)
Other		(584	)		(584	)
Deferred tax assets:
Operating loss carryforwards		4,251,516			4,188,512
Gross deferred tax assets		1,804,767			3,157,397
Valuation allowance		(1,804,767	)		(3,157,397	)
Net deferred income tax asset	$	-		$	-