Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

4. Income Taxes

Income tax provision (benefit) consists of the following:

	Year Ended December 31,
	2012		2011			2010
Federal income taxes:
Current	$	69,700	$	174,403		$	92,000
Deferred		122,850		(70,350	)		(211,700	)
		192,550		104,053			(119,700	)
State income taxes:
Current		12,221		28,800			17,100
Deferred		35,050		(20,150	)		(60,300	)
		47,271		8,650			(43,200	)
Income tax provision (benefit)	$	239,821	$	112,703		$	(162,900	)

Differences exist between certain accounting policies and related provisions included in federal income tax rules. The amounts by which these differences and other factors cause the total income tax provision to differ from an amount computed by applying the federal statutory income tax rate to financial income is set forth in the following reconciliation:

	Year Ended December 31,
	2012			2011			2010
Federal income tax expense (benefit) at statutory rate	$	351,395		$	410,686		$	28,207
Statutory depletion		(143,291	)		(320,627	)		(169,589	)
Prior period tax changes		(8,000	)		0			0
State income taxes		12,221			28,800			17,100
Other		27,496			(6,156	)		(38,618	)
Income tax provision (benefit)	$	239,821		$	112,703		$	(162,900	)

The components of net deferred tax asset (liability) are as follows:

	Year Ended December 31,
	2012			2011			2010
Current deferred taxes:
Gross assets	$	264,400		$	262,500		$	245,100
Gross liabilities		0			0			0
		264,400			262,500			245,100
Noncurrent deferred taxes:
Gross assets		2,340,500			2,500,300			2,474,700
Gross liabilities		0			0			0
Valuation allowance		(1,718,700	)		(1,718,700	)		(1,766,200	)
		621,800			781,600			708,500
	$	886,200		$	1,044,100		$	953,600

The tax effect of significant temporary differences representing deferred tax assets and (liabilities) are as follows:

	Year Ended December 31,
	2012			2011			2010
Accounts receivable	$	1,600		$	1,600		$	1,600
Asset retirement obligations		519,800			500,100			482,700
Statutory depletion carryover		1,718,700			1,718,700			1,766,200
Accrued liabilities		262,800			260,900			243,500
Total deferred tax assets		2,502,900			2,481,300			2,494,000
Property and equipment		102,000			281,500			225,800
Valuation allowance		(1,718,700	)		(1,718,700	)		(1,766,200	)
	$	886,200		$	1,044,100		$	953,600

At December 31, 2012, a valuation allowance has been provided against the statutory depletion carryover due to the uncertainty of its future utilization.

The Company believes that its estimate of deferred tax assets and determination to record a valuation allowance against the statutory depletion carryover are critical accounting estimates because they are subject to, among other things, an estimate of future taxable income, which is susceptible to change and dependent upon events that may or may not occur, and because the impact of recording a valuation allowance may be material to the assets reported on the balance sheet and results of operations.

At December 31, 2012, the Company has, for Federal income tax purposes, a statutory depletion carryover of approximately $4,421,000, which currently has no expiration date.

The Company adopted the provisions of FASB ASC Topic No. 740-10-25 (ASC 740-10-25), Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of ASC 740-10-25, the Company made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by ASC 740-10-25. As a result of the implementation of ASC 740-10-25, the Company recognized no material adjustments to liabilities or stockholders’ equity.

The Company files income tax returns in the U.S. Federal jurisdiction, and California, Texas and New York states. With few exceptions, the Company is no longer subject to U.S. Federal tax examination for the years prior to 2009. State jurisdictions that remain subject to examination range from 2008 to 2011. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of ASC 740-10-25, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the year ended December 31, 2012.