INCOME TAXES

12 Months Ended

Dec. 31, 2013

INCOME TAXES [Abstract]

INCOME TAXES

6. INCOME TAXES

Our provision for income taxes comprised the following (expense) benefit during the years ended December 31:

	2013			2012
Current:
Federal	$	(109,000	)	$	(248,000	)
State		(20,070	)		(64,000	)
Total current		(129,070	)		(312,000	)
Deferred:
Federal		(590,000	)		(842,000	)
State		(48,000	)		(20,000	)
Total deferred		(638,000	)		(862,000	)
Total income tax provision	$	(767,070	)	$	(1,174,000	)

Total income tax (expense) benefit differed from the amounts computed by applying the U.S. Federal statutory tax rates and estimated state rates to pre-tax income for the years ended December 31, 2013 and 2012 as follows:

	2013			2012
Statutory rate		34	%		34	%
State taxes, net of federal benefit		3	%		2	%
Effective rate		37	%		36	%

Deferred tax assets and liabilities are the result of temporary differences between the financial statement carrying values and tax bases of assets and liabilities.

Significant components of net deferred tax assets and liabilities are:

	December 31,
	2013			2012
Deferred tax assets:
Asset retirement obligation	$	393,000		$	357,000
Allowance for doubtful accounts		63,000			63,000
Accrued compensation and other		-			109,000
Unrealized loss on commodity derivatives		1,000			-
Alternative minimum tax credit carryforward		80,000			-
Total deferred tax assets		537,000			529,000
Deferred tax liability:
Difference in depreciation, depletion and capitalization methods – oil and gas properties		(3,446,000	)		(2,800,000	)
Total deferred tax liabilities		(3,446,000	)		(2,800,000	)
Net deferred tax liability	$	(2,909,000	)	$	(2,271,000	)

Our net deferred tax assets and liabilities are recorded as follows:

	2013			2012
Current asset	$	64,000		$	171,000
Non-current liability		(2,973,000	)		(2,442,000	)
Total	$	(2,909,000	)	$	(2,271,000	)

The Company had no material uncertain tax positions as of December 31, 2013 and 2012.

The Company's policy regarding income tax interest and penalties is to record those items as general and administrative expense.  During the years ended December 31, 2013 and 2012, there were no significant income tax interest and penalty items in the income statement, nor as a liability on the balance sheet at December 31, 2013 and 2012.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  Generally, the Company is no longer subject to U.S. federal or state income tax examination by tax authorities for years before 2010.  The Company is not currently involved in any income tax examinations.