Note 4 - Provision for Income Taxes

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

4

– PROVISION FOR INCOME TAXES

On

December 

22,

2017,

the President of the United States signed into law the Tax Cuts and Jobs Act (“Tax Act”), which substantially revised numerous areas of U.S. federal income tax law, including reducing the tax rate for corporations from a maximum rate of

35%

to a flat rate of

21%

and eliminating the corporate alternative minimum tax (AMT). The various estimates included in determining our tax provision as of

December 

31,

2018

remain provisional through the

three

months ended

March 

31,

2019

and

may

be adjusted through subsequent events such as the filing of our

2018

federal income tax return and the issuance of additional guidance such as new Treasury Regulations.

In

2019

and

2018,

the effective tax rate differed from the statutory rate, primarily as a result of allowable depletion for tax purposes in excess of the cost basis in oil and gas properties.

Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. The federal excess percentage depletion estimates will be updated throughout the year until finalized with the detail well-by-well calculations at year-end. 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, the proportional effect of these items on the effective tax rate

may

be significant.