Note 10. Income Taxes

The provision for income taxes consists of the following components:

	Year Ended December 31,
	2013		2012
Current	$	-	$	-
Deferred		-		(569,582)
	$	-	$	(569,582)

The current income tax benefit relates to a reduced level of uncertain tax positions identified in ASC 740 -10 Income Taxes. The components of deferred income tax assets and liabilities are as follows:

	December 31,
	2013		2012

Long-term deferred tax assets:
Stock compensation benefit	$	219,778	$	217,961
Net operating loss carryforward		1,680,998		2,874,832
Total long-term deferred tax assets		1,900,776		3,092,793
Valuation allowance		(1,900,776)		(2,431,924)
		-		660,869
Long-term deferred tax liabilities:
Intangible assets		-		-
Property and equipment		-		(660,869)
Total long-term deferred tax liabilities		-		(660,869)

Net deferred tax assets	$	-	$	-

The Company’s federal net operating loss (“NOL”) carryforward balance as of December 31, 2013 was $4,892,596, expiring between 2018 and 2033.

A schedule of the NOLs is as follows:

Tax Year		Net operating loss		NOL Expiration Year

	1998	$	184,360	2018
	1999		187,920	2019
	2000		25,095	2020
	2001		104,154	2021
	2002		15,076	2022
	2003		96,977	2023
	2004		78,293	2024
	2005		70,824	2025
	2006		48,526	2026
	2007		180,521	2027
	2008		534,087	2028
	2009		872,881	2029
	2010		706,174	2030
	2011		836,536	2031
	2012		728,496	2032
	2013		222,675	2033
		$	4,892,596

The Company's net deferred tax assets before valuation allowance as of December 31, 2013 was $1,900,776, most of which relates to net operating losses that expire from 2018 to 2033. The Company recorded an operating loss for the year and has a recent history of operating losses. After assessing the realization of the net deferred tax assets, we have recorded a valuation allowance of 100% of the value of the net deferred tax assets as we believe it more likely than not that the Company will not realize operating profits and taxable income so as to utilize all of the net operating losses in the future. During the year ended December 31, 2012, the Company recorded a valuation allowance of $569,582.

The Company is subject to income taxes in the U.S. federal jurisdiction and a number of state jurisdictions. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by tax authorities for the years before 2010.

The income tax provision differs from the expense that would result from applying statutory rates to income before income taxes principally because of permanent differences and the release of the valuation allowance on net deferred tax assets for which realization is certain. The effective tax rates for 2013 and 2012 were computed by applying the federal and state statutory corporate tax rates as follows:

	Year ended December 31,
	2013		2012

Statutory Federal income tax rate	34	%	34	%
State income taxes	1	%	1	%
Rate Differential	0	%	0	%
Impairment of intangibles & goodwill	0	%	-15	%
Less valuation allowance	-46	%	-26	%
Loss of expiring NOLs	0	%	-1	%
Adjustment to NOLs for Wood Energy	11	%	0	%
Other	0	%	0	%
	0	%	-7	%

The Company adopted the provisions of ASC 740, previously FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, on January 1, 2007. Previously the Company has accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5, Accounting for Contingencies.

The Company recognizes the financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than–not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date the Company applied ASC 740 to all tax positions for which the statute of limitations remained open. As a result of the implementation of ASC 740, the Company did not recognize a material increase in the liability for uncertain tax positions.

In adopting ASC 740-10, the Company elected to classify interest and penalties related to unrecognized tax benefits as income tax expenses. The Company has no accrued interest and penalties as of the years ended December 31, 2013 and 2012, because they are not material.

A reconciliation of beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 1, 2012	$	11,400
Additions based on tax positions related to prior years		-
Reductions based on tax positions related to prior years		-
Balance at December 31, 2012	$	11,400
Additions based on tax positions related to the current year		-
Reductions based on tax positions related to the current year		-
Balance at December 31, 2013	$	11,400

As of December 31, 2013 and December 31, 2012, the balance in unrecognized tax benefits was $11,400, respectively. The increases or decreases in each year are the result of management’s assessment that certain positions taken meet or no longer meet the more likely than not criteria established in ASC 740-10. If these unrecognized tax benefits were ultimately recognized, they would have reduced the Company’s annual effective tax rate.