Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

7. INCOME TAXES

The Company accounts for income taxes pursuant to ASC Topic 740-10, "Accounting for Income Taxes". ASC Topic 740-10 utilizes the liability method of computing deferred income taxes.

Income tax differed from the amounts computed by applying an effective United States federal income tax rate of 21% to pretax income in 2019 and 2018, and a rate of 34% to pretax income in 2017, as a result of the following:

	2019			2018			2017
Computed expected tax expense (benefit)	$	(157,000	)	$	77,000		$	78,000
Miscellaneous timing differences
related to book and tax depletion
differences and the expensing of
intangible drilling costs		(9,000	)		(233,000	)		(89,000	)
NOL Carryforward		—			—			(106,000	)
Gain on sale of oil and gas properties'		193,000			303,000			235,000
Expired and surrendered leases		—			.			(74,000	)
Correction of prior year estimate		12,000			77,000			—
Expected Federal income tax expense	$	39,000		$	224,000		$	44,000

Income Tax expense (benefit) for the years ended December 31, 2019, 2018, and 2017 consisted of the following:

	2019		2018		2017
Federal income taxes	$	39,000	$	224,000	$	44,000
State income taxes		—		—		—
Current income tax provision	$	39,000	$	224,000	$	44,000

Deferred income taxes reflect the effects of temporary differences between the tax bases of assets and liabilities and the reported amounts of those assets and liabilities for financial reporting purposes. Deferred income taxes also reflect the value of investment tax credits and an offsetting valuation allowance. The Company's total deferred tax assets and corresponding valuation allowance at December 31, 2019 and 2018 consisted of the following:

	December 31,
	2019			2018
Deferred tax assets
Depletion and amortization		152,000			282,000
Expired leasehold		145,000			134,000
Other, net		4,000			4,000
Depreciation		47,000			—
Total deferred tax assets		348,000			420,000
Deferred tax liabilities
Intangible drilling costs		(292,000	)		(482,000	)
Depreciation		—			(24,000	)
Total deferred tax liability		(292,000	)		(506,000	)
Net deferred income tax asset (payable)	$	56,000		$	(86,000	)

On December 22, 2017, the U.S. Congress enacted the Tax Cuts and Jobs Act (the “Act”) which made significant changes to U.S. federal income tax law, including lowering the federal statutory corporate income tax rate to 21% beginning January 1, 2018. The income tax effects of changes in tax laws are recognized in the period when enacted. The Company re-measured its deferred tax balances by applying the reduced rate and recorded a provisional deferred tax expense of $189,000 during the year ended December 31, 2017. The change in the deferred tax balances due to the rate reduction has been calculated to comprise $128,000 of the $189,000 reported in the consolidated statements of operations for the year ended December 31, 2017.

The Company's estimate does not reflect effects of any state tax law changes and uncertainties regarding interpretations that may arise as a result of federal tax reform.