At September 30, 2018 and 2017, the Company had tax provisions of $nil and $68,985, relating to unrecognized gains on securities held for sale, respectively. At September 30, 2018 and 2017, the Company had deferred tax assets arising principally from net operating loss carryforwards for income tax purposes. As the Company’s management cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at September 30, 2018 and 2017.

The components of the Company’s deferred taxes at September 30, 2018 and 2017 are as follows:

Timberline Resources Corp		2018		2017
Net deferred tax assets:
Exploration costs	$	218,000	$	684,000
Investments in subsidiaries		184,000		282,000
Share-based compensation		1,451,000		2,181,000
Alternative minimum tax credit carryforwards		2,000		2,000
Foreign income tax credit carryforwards		697,000		697,000
Federal and state net operating loss carryforwards		10,579,000		15,097,000
Foreign net operating loss carryforwards		1,736,000		1,736,000
Total deferred tax asset		14,867,000		20,679,000
Valuation allowance		(14,867,000)		(20,679,000)
Net deferred tax asset	$	0	$	0

BH Minerals USA, Inc.
Net deferred tax assets (liabilities):
Property, mineral rights, and equipment	$	(2,282,000)	$	(3,807,000)
Exploration costs		810,000		1,709,000
Federal and state net operating loss carryforwards		3,302,000		5,091,000
Total deferred tax asset		1,830,000		2,993,000
Valuation allowance		(1,830,000)		(2,993,000)
Net deferred tax asset	$	0	$	0

The federal income taxes of the Company’s wholly owned subsidiary, BH Minerals USA, Inc., are not consolidated with those of the rest of the Company since BH Minerals USA, Inc. is wholly owned by the Company’s Canadian subsidiary, Staccato Gold Resources Ltd.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Act"), resulting in significant modifications to existing law. The Company did not incur any income tax benefit or provision for the year ended September 30, 2018, as a result of the changes to tax laws and tax rates under the Act. The Company’s total net deferred tax asset was reduced by approximately $7.5 million during the year ended September 30, 2018, which consisted primarily of the remeasurement of federal deferred tax assets and liabilities from 35% to 21%.

The annual tax benefit is different from the amount that would be provided by applying the statutory federal income tax rate to the Company’s pretax loss for the following reasons:

		2018		2017

Net Loss	$	(5,058,000)	$	(1,577,000)
Statutory Federal income tax rate		24.5%		35%

Expected income tax benefit based on statutory rate		(1,239,000)		(552,000)
Effect of state taxes		(47,000)		(15,000)
Effect of tax rate changes		8,237,000		-
Non-recognition due to increase in valuation allowance		(6,976,000)		591,000
Other		25,000		45,000
Income tax provision	$	-	$	69,000

At September 30, 2018, the Company had federal net operating loss carryforwards of approximately $46.7 million which will expire in fiscal years ending September 30, 2020 through September 30, 2038. Approximately $15.7 million of state net operating loss carryforwards will expire in fiscal years ending September 30, 2019 through September 30, 2038.

BH Minerals has federal net operating loss carryforwards of $15,723,000 which will expire in fiscal years ending September 30, 2031 through September 30, 2038.

At September 30, 2018, the Company also has approximately $6.7 million in net operating loss carryforwards in Canada which will expire in fiscal years ending September 30, 2024 through September 30, 2032.

At September 30, 2018, the Company has $697,000 of foreign tax credit carryforwards that will expire September 30, 2020.

The Company has not identified any unrecognized tax benefits. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to other operating expense. Fiscal years 2015 through 2018 remain subject to examination by state and federal tax authorities. The Company has reviewed its tax returns and believes the Company has not taken any unsubstantiated tax positions.

IRS Code Section 382 limits the loss and credit carryforwards in the event of an “ownership change” of a corporation. Due to the changes in ownership in 2004 and 2008, the Company will be restricted in the future use of net operating losses generated before the ownership change.