Income Taxes

12 Months Ended

Dec. 31, 2016

Income Taxes

Income Taxes

 8. Income Taxes

At December 31, 2016, the Company has net operating loss ("NOL") carryforwards for Federal income tax purposes of approximately $10,214,000. If not previously utilized, the NOL carryforwards will expire in 2018 through 2036.

For the years ended December 31, 2016 and 2015, 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, 2016 and 2015 differs from the amounts computed using the federal statutory tax rate of 34%, as follows:

	2016			2015
Income tax benefit (expense) at the statutory rate	$	1,530,000		$	1,614,000
Benefit (expense) resulting from:
Increase in Federal valuation allowance		(1,530,000	)		(1,884,000	)
Other permanent differences		-			270,000
Utilization of net operating loss carryforwards		-			-
Income tax benefit (expense)	$	-		$	-

At December 31, 2016 and 2015, the tax effects of temporary differences that give rise to significant deferred tax assets and liabilities are presented below:

	2016			2015
Federal net operating loss carryforwards	$	3,473,000		$	3,030,000
State net operating loss carryforwards		358,000			315,000
Oil and gas properties		1,927,000			917,000
Asset retirement obligations		405,000			371,000
Net deferred tax assets		6,163,000			4,633,000
Less valuation allowance		(6,163,000	)		(4,633,000	)
Net deferred tax assets	$	—		$	—

The Company has not maintained a tax basis property roll-forward and has not filed tax returns since 2011 and therefore, the tax assets disclosed above are management's best estimate and this estimate could change as the company completes it tax returns. 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, 2016 and 2015.

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, 2016 and 2015, 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 2011 through 2016 remain open to examination by these taxing jurisdictions.