14. Tax Provision

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Tax Provision

14. Tax Provision

The Company utilizes ASC 740, Income Taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company generated a deferred tax credit through net operating loss carry forwards.

The following table sets forth the components of income tax (benefit) expense for the years ended December 31, 2019 and 2018:

	December 31, 2019			December 31, 2018
Federal	$	(477,625	)	$	477,625
State and local		(105,305	)		105,305
Total	$	(582,931	)	$	582,931

The following table sets forth a reconciliation of income tax expense (benefit) at the federal statutory rate to recorded income tax expense (benefit) for the years ended December 31, 2019 and 2018:

	December 31, 2019			December 31, 2018
Federal taxes at U.S. statutory rate		21.0%			21.0%
State income taxes		4.6%			4.6%
Permanent and temporary differences		(15.5%	)		27.5%
Change in valuation allowance		(6.8%	)		(15.1%	)
Effective tax rate		3.3%			38.1%

The following tables set forth the components of income taxes payable as of December 31, 2019 and 2018:

	December 31, 2019		December 31, 2018
Federal	$	–	$	477,625
State and local		–		105,305
Total	$	–	$	582,931

The following tables set forth the components of deferred income taxes as of December 31, 2019 and 2018:

	December 31, 2019			December 31, 2018
Deferred tax assets:
Bad debt allowance	$	18,168			–
Accrued expenses		38,413			–
Share based compensation accruals		3,528,726			373,493
Net operating loss carryforwards		1,703,425			–
Unrealized losses		578,201			118,766
Total deferred tax assets		5,866,934			492,259
Less: valuation allowance		(5,598,511	)		(492,259	)
Net deferred tax assets	$	268,423			–
Deferred tax liabilities:
Prepaid expenses	$	121,777			7,434
Fixed assets		12,388			24,256
Goodwill and intangible assets		636,188			174,173
Unrealized gains		417,046			–
Total deferred tax liabilities		1,187,399			205,863
Less: valuation allowance		(1,187,399	)		(205,863	)
Net deferred tax liabilities	$	–			–
Total deferred tax assets, net	$	268,423			–

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (“TCJA”), which instituted fundamental changes to the taxation of corporations, including a reduction the U.S. corporate income tax rate to 21% beginning in 2018.

As of December 31, 2019, the Company had federal, state and local net operating loss carryforwards of approximately $6.6 million that are available to offset future liabilities for income taxes. The Company has generally established a valuation allowance against these carryforwards based on an assessment that it is more likely than not that these benefits will not be realized in future years. The federal and state net operating loss carryforwards expire in 2039.

The Company remains subject to examination in federal and state jurisdictions in which the Company conducts its operations and files tax returns. These tax years range from 2015 through 2019. The Company believes that the results of current or any prospective audits will not have a material effect on its financial position or results of operations as adequate reserves have been provided to cover any potential exposures related to these ongoing audits.

The Company has made its assessment of the level of tax authority for each tax position (including the potential application of interest and penalties) based on the technical merits and determined that no unrecognized tax benefits associated with the tax positions exist.