Note 6 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

6

–

INCOME TAXES

Components of deferred taxes are as follows:

	December 31,
	2016		2015
Assets:
Net Leasehold Impairment Reserves	$	290,167	$	298,061
Gas Balance Receivable		52,379		52,379
Long-Lived Asset Impairment		1,745,936		2,163,449
Deferred Geological and Geophysical Expense		62,720		110,107
Other		406,579		385,307
Total Assets		2,557,781		3,009,303

Liabilities:
Receivables		91,622			70,335
Intangible Drilling Costs		2,856,294			3,434,057
Depletion, Depreciation and Other		1,121,025			1,131,281
Total Liabilities		4,068,941			4,635,673
Net Deferred Tax Liability	$	(1,511,160	)	$	(1,626,370	)

The decrease in the deferred tax liability for

2016

reflected in the above table is primarily the result of a decline of intangible drilling costs.

The following table summarizes the current and deferred portions of income tax expense:

	Year Ended December 31,
	2016			2015
Current Tax Provision/(Benefit):
Federal	$	(57,494	)	$	402,676
State		(182	)		(15,790	)
Total Current Provision/(Benefit)		(57,676	)		386,886
Deferred Tax Benefit		(115,210	)		(1,859,431	)
Total Benefit	$	(172,886	)	$	(1,472,545	)

The total income tax benefit expressed as a percentage of loss before income tax was

67%

for

2016

and

44%

for

2015.

These amounts differ from the amounts computed by applying the statutory U.S. federal income tax rate of

34%

for

2016

and

2015

to loss before income tax as summarized in the following reconciliation:

	Year Ended December 31,
	2016			2015
Computed Federal Tax Benefit	$	(87,418	)	$	(1,141,678	)
Increase (Decrease) in Tax From:
Allowable Depletion in Excess of Basis		(83,460	)		(359,552	)
Dividend Received Deduction		(878	)		(723	)
State Income Tax Benefit		(182	)		(15,790	)
Other		(948	)		45,198
Income Tax Benefit	$	(172,886	)	$	(1,472,545	)
Effective Tax Rate		67%			44%

Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. When a provision for income taxes is recorded, federal excess percentage depletion benefits decrease the effective tax rate. When a benefit for income taxes is recorded, federal excess percentage depletion benefits increase the effective tax rate. The benefit of federal excess percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where a recorded pre-tax income is relatively small or a pre-tax loss, the proportional effect of these items on the effective tax rate

may

be significant.