Note 13 – Income Taxes

The Company’s current and deferred income tax provision are as follows:


	Year Ended December 31,
	2019		2018
Current provision (benefit):
Federal	$	—	$	4,000
States		133,000		90,000
Total current provision		133,000		94,000
Deferred provision:
Federal		333,000		575,000
States		119,000		205,000
Total deferred provision		452,000		780,000
Total provision for income taxes	$	585,000	$	874,000

The provision for income taxes is different from amounts computed by applying the U.S. statutory rates to consolidated earnings (loss) before taxes. The significant reason for these differences is as follows:


	Year Ended December 31,
	2019		2018
Expected tax provision -- Income taxes computed at Federal statutory rate	$	(6,654,000)	$	6,000
Increase (decrease) in tax expense resulting from:
Gain on asset contribution		782,000		—
Crackle amortization		2,769,000		—
State and local taxes		276,000		276,000
Programming costs		(41,000)		(1,384,000)
Acquisition-related costs		887,000		116,000
Share-based compensation - incentive plan		286,000		237,000
Film library		341,000		1,620,000
Allowance for doubtful accounts		348,000		—
Other		28,000		3,000
Increase in valuation allowance		1,563,000		—
Actual tax provision	$	585,000	$	874,000

Deferred income taxes reflect the “temporary differences” between the financial statement carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, adjusted by the relevant tax rate. The components of the deferred tax assets and liabilities are as follows:


	December 31,		December 31,
	2019		2018
Deferred Tax Assets:
Net operating loss carry-forwards	$	9,680,000	$	3,022,000
Acquisition-related costs		723,000		663,000
Film library and other intangibles		3,769,000		427,000
Deferred state taxes		34,000		157,000
Less: valuation allowance		(11,243,000)		(719,000)
Total Deferred Tax Assets	$	2,963,000	$	3,550,000
Deferred Tax Liabilities:
Programming costs		2,820,000		2,779,000
Other assets		143,000		319,000
Total Deferred Tax Liabilities	$	2,963,000	$	3,098,000
Net deferred tax asset	$	—	$	452,000

The Company and its subsidiaries have combined net operating losses of approximately $35,951,000, $10,845,000 of which were incurred before 2018 and expire between 2031 and 2037 with the balance of $25,106,000 having no expiration under changes made by the Tax Cuts and Jobs Act but may only be utilized generally to offset 80 percent of taxable income. The ultimate realization of the tax benefit from net operating losses is dependent upon future taxable income, if any, of the Company.

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers when the stock ownership of one or more 5% stockholders (stockholders owning 5% or more of the Company’s outstanding capital stock) has increased by more than 50 percentage points. Additionally, the separate-return-limitation-year (SRLY) rules that apply to consolidated returns may limit the utilization of losses in a given year when consolidated tax returns are filed. Management has determined that because of a recent history of recurring losses, the ultimate realization of the net operating loss carryovers is not assured and has recorded a full valuation allowance. Public trading of the Company’s stock poses a risk of an ownership change beyond the control of the Company that could trigger a limitation of the use of the loss carryover.

The deferred tax asset valuation allowance increased by $10,524,000 and $609,000 for the years ended December 31, 2019 and 2018, respectively.