The Company accounts for income taxes in accordance with standards of disclosure propounded by the FASB, and any related interpretations of those standards sanctioned by the FASB. Accordingly, deferred tax assets and liabilities are determined based on differences between the consolidated financial statement and tax bases of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. Due to the uncertainty as to the utilization of net operating loss carry forwards, a valuation allowance has been made to the extent of any tax benefit that net operating losses may generate.

The provision for income taxes was $0 and $800 for the years ended December 31, 2020 and 2019, respectively.

For Federal and California income tax purposes, the Company has net operating loss carry forwards that expire through 2037. The net operating loss as of December 31, 2020 and 2019 was $4,749,635 and $4,711,990, respectively. The Company experienced a Section 382 change of ownership in connection with the Merger in 2017, thereby subjecting net operating loss carryovers generated previously to limitations on utilization. To-date, these limitations have not had an impact on the Company’s reported income tax.

The deferred tax asset and the valuation allowance consist of the following at December 31:

	2020			2019

Deferred tax asset	$	1,535,448		$	1,501,638
Valuation allowance		(1,535,448	)		(1,501,638	)

Net	$	-		$	-

The ultimate realization of our deferred tax asset is dependent, in part, upon the tax laws in effect, our future earnings, and other events. As of December 31, 2020 and 2019, we recorded a 100% allowance against our deferred tax asset since we were unable to conclude that it is more likely than not that our deferred tax asset will be realized.

In November 2020, the Company closed an Internal Revenue Service tax audit for 2015 and 2016. The Company had previously reserved for these amounts and has negotiated a payment plan to repay these amounts, plus penalties and interest. The years open to examination by taxing authorities vary by jurisdiction; no years prior to 2018 are open.