6.	Income Taxes

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

	2014			2013
Current:
Federal	$	-		$	(109,000	)
State		(1,000	)		(20,070	)
Total current		(1,000	)		(129,070	)

Deferred:
Federal		1,008,000			(590,000	)
State		10,506			(48,000	)
Total deferred		1,018,506			(638,000	)

Total income tax provision	$	1,017,506		$	(767,070	)

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, 2014 and 2013 as follows:

	2014			2013
Statutory rate (benefit)		(34	%)		34	%
State taxes, net of federal benefit		0	%		3	%
Effective rate (benefit)		(34	%)		37	%

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,
	2014			2013
Deferred tax assets:
Asset retirement obligation	$	640,000		$	393,000
Allowance for doubtful accounts		63,000			63,000
Stock compensation and other		34,000			-
Unrealized loss on commodity derivatives		-			1,000
Alternative minimum tax credit carryforward		128,000			80,000
Net operating loss carryforward		1,001,000			-
Total deferred tax assets		1,866,000			537,000

Deferred tax liability:
Difference in depreciation, depletion and capitalization methods – oil and gas properties		(3,832,000	)		(3,446,000	)
Total deferred tax liabilities		(3,832,000	)		(3,446,000	)

Net deferred tax liability	$	(1,966,000	)	$	(2,909,000	)

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

	2014			2013
Current asset	$	98,000		$	64,000
Non-current liability		(2,064,000	)		(2,973,000	)
Total	$	(1,966,000	)	$	(2,909,000	)

The Company had no material uncertain tax positions as of December 31, 2014 and 2013.

The Company expects to have a net operating loss of approximately $2.8 million for the tax year ending December 31, 2014, and can be carried forward 20 years to 2034.

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, 2014 and 2013, 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, 2014 and 2013.

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 2011. The Company is not currently involved in any income tax examinations.