Income Taxes

12 Months Ended

Dec. 31, 2015

Income Taxes

Income Taxes

9. Income Taxes

At December 31, 2015, the Company has net operating loss (“NOL”) carryforwards for Federal income tax purposes of approximately $8,336,000. If not previously utilized, the NOL carryforwards will expire in 2018 through 2035.

For the years ended December 31, 2015 and 2014, the Company did not recognize any current or deferred income tax benefit or expense. Actual income tax benefit (expense) for the years ended December 31, 2015 and 2014 differs from the amounts computed using the federal statutory tax rate of 34%, as follows: 

	2015			2014
Income tax benefit (expense) at the statutory rate	$	1,614,000		$	(21,000	)
Benefit (expense) resulting from:
Increase in Federal valuation allowance		(1,884,000	)		—
Other permanent differences		270,000			—
Utilization of net operating loss carryforwards		—			21,000
Income tax benefit (expense)	$	—		$	—

At December 31, 2015 and 2014, the tax effects of temporary differences that give rise to significant deferred tax assets and liabilities are presented below: 

	2015			2014
Federal net operating loss carryforwards	$	3,030,000		$	2,465,000
State net operating loss carryforwards		315,000			264,000
Oil and gas properties		917,000			(222,000	)
Asset retirement obligations		371,000			241,000
Net deferred tax assets		4,632,000			2,748,000
Less valuation allowance		(4,632,000	)		(2,748,000	)
Net deferred tax assets	$	—		$	—

A valuation allowance has been recorded for all deferred tax assets since the “more likely than not” realization criterion was not met as of December 31, 2015 and 2014.

A tax benefit from an uncertain tax position may be recognized if it is “more likely than not” that the position is sustainable based solely on its technical merits. For the years ended December 31, 2015 and 2014, the Company had no unrecognized tax benefits and management is not aware of any issues that would cause a significant increase to the amount of unrecognized tax benefits within the next year. The Company’s policy is to recognize any interest or penalties as a component of income tax expense. The Company’s material taxing jurisdictions are comprised of the U.S. federal jurisdiction and the states of Colorado, Wyoming and Kansas. The tax years 2010 through 2015 remain open to examination by these taxing jurisdictions.