Provision for Taxes

12 Months Ended

Dec. 31, 2011

Provision for Taxes [Abstract]

PROVISON FOR TAXES

NOTE 8 - PROVISION FOR TAXES

The Company’s income tax provision is as follows:

	2011			2010
Current:	$	214,000		$	450,000
Deferred:
Change in Depreciation, depletion and amortization	$	(1,645,000	)	$	(816,000	)
Change in other items		49,000			(390,000	)
Reduction of NOL		2,478,000			11,054,000
Increase in AMT credit		(214,000	)		(450,000	)
Change in valuation allowance		(668,000	)		(9,398,000	)
Total	$	214,000		$	450,000

The income tax provisions of $214,000 for 2011 and $450,000 for 2010 represent a current tax that is for the alternative minimum tax (AMT) that will not be offset by the NOL, but will create a deferred tax credit carried forward indefinitely. The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates to pretax income from continuing operations for the years ended December 31, 2011 and 2010 primarily due to the utilization of NOL carryforwards, expense related to stock and options issued for services, intangible drilling costs, availability of AMT credit carryforward, and the valuation allowance.

At December 31, 2011, Trans Energy had net operating loss carryforwards of approximately $6.2 million that may be offset against future taxable income from 2012 through 2030. No deferred tax benefit has been reported in the December 31, 2011 and 2010 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

Net deferred tax assets and liabilities consist of the following components as of December 31, 2011 and 2010:

	2011			2010
Deferred tax assets:
NOL carryover	$	2,118,000		$	4,596,000
AMT Credit		664,000			450,000
Unrealized loss on derivative contract		—			63,000
Other		113,000			99,000
Total deferred tax assets		2,895,000			5,208,000
Deferred tax liabilities:
Depreciation, depletion and amortization		(2,289,000	)		(3,934,000	)
Total deferred tax liabilities		(2,289,000	)		(3,934,000	)
Valuation allowance		(606,000	)		(1,274,000	)
Net deferred taxes	$	—		$	—