PROVISION FOR TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

PROVISION FOR TAXES

NOTE 8 - PROVISION FOR TAXES

The Company’s income tax (benefit) provision is as follows:

	2013			2012
Current:	$	—		$	(58,013	)
Deferred:
Change in depreciation, depletion and amortization	$	2,895,000		$	(1,737,000	)
Change in unrealized loss on derivative		232,000			(275,000	)
Change in other items		128,000			(29,000	)
Change in NOL		(11,783,000	)		(3,564,000	)
Increase in AMT credit		—			58,000
Change in valuation allowance		8,528,000			5,547,000
Total	$	—		$	(58,013	)

The income tax benefit of $58,013 for 2012 represents a current tax that is for alternative minimum tax (AMT) related to the 2011 sale 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, 2013 and 2012 primarily due to the utilization of NOL carryforwards, expense related to stock options, intangible drilling costs, availability of AMT credit carryforwards, and the valuation allowance.

At December 31, 2013, Trans Energy had net operating loss carryforwards of approximately $51.4 million that may be offset against future taxable income from 2014 through 2032. Except for an over accrual adjustment, no tax benefit has been reported in the December 31, 2013 and 2012 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, 2013 and 2012:

	2013			2012
Deferred tax assets:
NOL carryover	$	17,465,000		$	5,682,000
AMT credit		606,000			606,000
Unrealized loss on derivative contract		43,000			275,000
Other		14,000			142,000
Total deferred tax assets		18,128,000			6,705,000
Deferred tax liabilities:
Depreciation, depletion and amortization		(3,447,000	)		(552,000	)
Total deferred tax liabilities		(3,447,0000	)		(552,000	)
Valuation allowance		(14,681,000	)		(6,153,000	)
Net deferred taxes	$	—		$	—