5. INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

The components of income tax expense are as follows for the years ended December 31:

	2016		2015
Current	$	1,295	$	1,270
Deferred		–		–
Total	$	1,295	$	1,270

Deferred tax assets are calculated using a combined statutory tax rate of 39%. The Company’s deferred income tax asset and the related valuation allowance are as follows at December 31:

	2016			2015
Deferred tax assets - current:
Accrued compensation	$	184,324		$	128,749
Accrued interest – related party		480			372
		184,804			129,121
Deferred tax assets - long-term:
Net operating loss carryforwards		5,774,160			5,733,902
Amortization		20,914			16,851
Total deferred income tax assets		5,979,878			5,879,874
Valuation allowance		(5,979,878	)		(5,879,874	)
Total	$	–		$	–

A reconciliation of provision (benefit) for income taxes provided at the federal statutory rate to actual provision for income taxes is as follows for the years ended December 31:

	2016			2015
Benefit (provision) for income taxes computed at federal statutory rate	$	104,386		$	194,720
State income taxes, net of federal benefit		39			43
Other		(64,128	)		(143,559	)
Valuation allowance		(39,002	)		(49,934	)
Provision for Income taxes	$	1,295		$	1,270
Effective tax rate		-0.48%			-0.25%

As of December 31, 2016, the Company had net operating loss carry-forwards for federal income tax reporting purposes of approximately $14.8 million that may be offset against future taxable income through 2036. The Company has state net operating loss carry-forwards of $5.1 million that may be offset against future taxable income through 2029. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance that the carry-forwards will expire unused. Accordingly, the potential tax benefits of the loss carry-forwards are offset by a valuation allowance of the same amount.

The Company files income tax returns in the U.S. federal and Utah jurisdictions. Tax years 2012 to current remain open to examination by U.S. federal and state tax authorities.