15. INCOME TAXES

12 Months Ended

Mar. 31, 2023

Notes

15. INCOME TAXES

15.  INCOME TAXES

The Company had no income tax expense due to operating loss incurred for the years ended March 31, 2023 and 2022.

United States

Section 2303. Modifications for net operating losses (NOL): Under Code Section 172(a) the amount of the NOL deduction is equal to the lesser of (a) the aggregate of the NOL carryovers to such year and NOL carrybacks to such year, or (b) 80% of taxable income computed without regard to the deduction allowable in this section. Thus, NOLs are currently subject to a taxable-income limitation and cannot fully offset income. The Act temporarily removes the taxable income limitation to allow an NOL to fully offset income.

Section 2306. Modifications of limitation on business interest: The 2017 Tax Cuts and Jobs Act of 2017 (TCJA) generally limited the amount of business interest allowed as a deduction to 30% of adjusted taxable income. The Act temporarily and retroactively increases the limitation on the deductibility of interest expense under Code Section 163(j)(1) from 30% to 50% for tax years beginning in 2019 and 2020. (Code Section 163(j)(10)(A)(i) as amended by Act Section 2306(a)).

The Company has not recorded the necessary provisional adjustments in the financial statements in accordance with its current understanding of the CARES Act and guidance currently available as of this filing. But is reviewing the CARES Act potential ramifications.

Mexico

Corporations resident in Mexico are taxable on their worldwide income from all sources, including profits from business and property. The Company is subject to Mexico tax at a rate of 30% on taxable income, if any, from Mexico operations. Subject to certain limitations, losses incurred in prior years by a business may be carried forward and deducted from income earned over a subsequent ten-year period. Net operating loss carrybacks are not allowed.

The tax effects of temporary differences and tax loss and credit carry forwards that give rise to significant portions of deferred tax assets and liabilities on March 31, 2023 and 2022 are comprised of the following:

	Year Ended	Year Ended
	March 31, 2023	March 31, 2022
Deferred tax assets:
Net-operating loss carryforward	$5,286,489	$5,213,787
Total deferred tax assets	5,286,489	5,213,787
Valuation allowance	(5,286,489)	(5,213,787)
Deferred tax assets, net of allowance	$-	$-

	Year Ended	Year Ended
	March 31, 2023	March 31, 2022
Federal
Current	$-	$-
Deferred	5,286,489	5,213,787
State	-	-
Current	-	-
Deferred	-	-
Change in valuation allowance	(5,286,489)	(5,213,787)
Income tax provision	$-	$-

We have a net operating loss ("NOL") carry forward for U.S. income tax purposes aggregating approximately $20.0M as of March 31, 2023 expiring through the tax year 2039, subject to the Internal Revenue Code Section 382/383, which places a limitation on the amount of taxable income that can be offset by net operating losses after a change in ownership. In addition, to U.S. NOL's, we have a Mexico NOL for our Mexico operations as of March 31, 2023 of approximately $3.6M that expires through 2033.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. In case the deferred tax assets will not be realized in future periods, the Company has provided a valuation allowance for the full amount of the deferred tax assets on March 31, 2023. The valuation allowance increased by approximately $0.1 million as of March 31, 2023.

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:

	Year Ended March 31, 2023	Year Ended March 31, 2022
Statutory Federal Income Tax Rate	21%	21%
Non-deductible expenses	(14%)	(14%)
Change in valuation allowance	(7%)	(7%)
Income tax provision	-	-

The Company has not identified any uncertain tax positions requiring a reserve as of March 31, 2023.

The Company has not filed its U.S. federal income tax returns, including, without limitation, information returns on Internal Revenue Service (“IRS”) Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations for the years ended March 31, 2010 through 2023. Failure to furnish any information with respect to any foreign business entity required, within the time prescribed by the IRS, subjects the Company to certain civil penalties.