Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes

Note 11. Income Taxes

Pursuant to ASC 740, income taxes are provided for based upon the liability method of accounting.  Under this approach, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.

We are subject to taxation in the U.S. and the state of Oregon. The Company is not current on its tax filings and is subject to examination until the filings take place.

At December 31, 2013 and 2012, the Company had gross deferred tax assets calculated at an expected blended rate of 38% of approximately $10,251,000 and $10,115,000, respectively, principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance of $10,251,000 and $10,115,000 has been established at December 31, 2013 and 2012, respectively.

Topic 740 in the Accounting Standards Codification (ASC 740) prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  At December 30, 2013, the Company had taken no tax positions that would require disclosure under ASC 740.

The Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns and found no positions that would require a liability for unrecognized income tax benefits to be recognized.  We are subject to examinations for all unfiled tax years.  We deduct interest and penalties as interest expense on the financial statements.

Additionally, the future utilization of our net operating loss and R&D credit carryforwards to offset future taxable income may be subject to an annual limitation, pursuant to IRC Sections 382 and 383, as a result of ownership changes that may have occurred previously or that could occur in the future.

There is no unrecognized tax benefit included in the balance sheet that would, if recognized, affect the effective tax rate. 

The significant components of the Company’s net deferred tax assets (liabilities) at December 31, 2013 and 2012 are as follows:

	2013			2012
Gross deferred tax assets:
Net operating loss carryforwards	$	9,275,000		$	9,187,000
Difference between book and tax basis of former subsidiary stock held		-			-
Stock based expenses		202,000			154,000
Tax credit carryforwards		211,000			211,000
All others		563,000			563,000
		10,251,000			10,115,000
Deferred tax asset valuation allowance		(10,251,000	)		(10,115,000	)
Net deferred tax asset (liability)	$	-			-

At December 31, 2013, the Company has net operating loss carryforwards of approximately $9,275,000, which expire in the years 2013 through 2032. The net change in the allowance account was an increase of $136,000 for the year ended December 31, 2013.