9. Income Taxes

Income (loss) before income taxes is as follows for the periods indicated:


	Year ended December 31,
	2019		2018
Foreign		(307,286)	$	(665,924)
U.S.		12,782,774		8,070,409
	$	12,475,488	$	7,404,485

We file a federal income tax return in the United States, Canada, and various state and local jurisdictions.

We believe that we have appropriate support for the income tax positions taken and to be taken on the Company’s tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. The Company’s tax returns are open to audit under the statute of limitations for the years ended December 31, 2016 through December 31, 2019.

The following tables present the Company’s current and deferred tax expense (benefit) for the periods indicated:


	Year ended December 31,
	2019		2018
Current:
Federal	$	1,010,181	$	1,742,898
State		355,122		(428,068)
Total current income tax expense		1,365,303		1,314,830
Deferred:
Federal		1,527,937		(392,574)
State		884,249		(179,831)
Total deferred tax expense (benefit)		2,412,186		(572,405)
Income tax expense	$	3,777,489	$	742,425

The following table presents the reconciliation of our income taxes calculated at the statutory federal tax rate to the income tax provision in our financial statements. Our effective tax rate for 2019 differs from the statutory rate primarily due to state taxes. In addition to state taxes, our effective tax rate for 2018 differs from the statutory rate primarily due to lapsed uncertain tax positions.


	Year Ended				Year Ended
	December 31,		Effective		December 31,		Effective
	2019		Tax Rate		2018		Tax Rate
Income tax provision computed at the statutory federal tax rate	$	2,619,853	21.00	%	$	1,554,942	21.00	%
Difference in Canadian and U.S. tax rate		(16,901)	(0.14)	%		(30,633)	(0.41)	%
Valuation allowance on Canadian loss		81,431	0.65	%		170,477	2.30	%
Return to provision adjustment		16,503	0.13	%		(179,120)	(2.42)	%
State taxes		979,102	7.85	%		349,643	4.72	%
Miscellaneous other items		97,501	0.80	%		28,860	0.39	%
Change in uncertain tax position		—	—	%		(1,151,744)	(15.55)	%
Income tax expense	$	3,777,489	30.29	%	$	742,425	10.03	%

Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As of December 31, 2019, we have no U.S. federal net operating loss carry-forwards and approximately $8.5 million of state net operating loss carry-forwards, which begin to expire after 2025. These loss carryforwards may reduce future taxable income, however, the extent of which may be limited due to any IRC Section 382 limitation.

Net deferred tax liabilities consisted of the following at December 31, 2019 and 2018:


	As at December 31,
	2019		2018
Deferred tax assets:
State net operating loss carryforwards	$	492,672	$	465,496
Canadian net operating loss carryforwards		12,195,114		12,113,684
ARO		833,562		—
Unrealized Hedge/Other		71,524		91,646
Gross deferred tax assets		13,592,872		12,670,826
Valuation allowance		(12,195,114)		(12,113,684)
Total deferred tax assets		1,397,758		557,142
Deferred tax liabilities:
Oil and gas property		(10,210,078)		(7,407,828)
Partnership		(3,016,277)		(3,138,592)
Unrealized Hedge/Other		(572,867)		—
Total deferred tax liabilities		(13,799,222)		(10,546,420)
Net deferred tax liability	$	(12,401,464)	$	(9,989,278)

We have recorded a valuation allowance against the Canadian net operating losses as we do feel that it is more likely than not that they will not be utilized as the Company does not have any revenue producing activities in Canada.

We are subject to taxation in the United States and various state jurisdictions. As of December 31, 2019 and 2018, the Company had no gross liability for income taxes associated with uncertain tax positions. The Company recognizes interest expense and penalties related to the uncertain tax position in the income tax expense line in the accompanying consolidated statements of operations and comprehensive loss. Accrued interest and penalties are included in other non-current liabilities in the consolidated balance sheets and were $0 as of December 31, 2019 and 2018.