Provision for Taxes

12 Months Ended

Dec. 31, 2015

NOTE 9 - PROVISION FOR TAXES

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


	2015			2014
Current:	$	—		$	—

Deferred:
Change in depreciation, depletion and amortization	$	3,864,000		$	1,437,000
Change in unrealized gain (loss) on derivative		(1,399,000	)		2,841,000
Change in other items		17,000			(17,000	)
Change in NOL		(10,342,000	)		(4,160,000	)
Change in accruals		544,000			(1,020,000	)
Change in valuation allowance		7,316,000			919,000

Total	$	—		$	—

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, 2015 and 2014 primarily due to the generation of NOL carryforwards, expense related to stock options, intangible drilling costs, availability of AMT credit carryforwards, unrealized gain (loss) on derivative contracts and the valuation allowance.

At December 31, 2015, Trans Energy had net operating loss carryforwards of approximately $94.0 million that may be offset against future taxable income from 2016 through 2035. No tax benefit has been reported in the December 31, 2015 and 2014 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, 2015 and 2014:


	2015			2014
Deferred tax assets:
NOL carryover	$	31,967,000		$	21,625,000
AMT credit		606,000			606,000
Accruals		476,000			1,020,000
Other		14,000			31,000

Total deferred tax assets		33,063,000			23,282,000

Deferred tax liabilities:
Depreciation, depletion and amortization		(8,748,000	)		(4,884,000	)
Unrealized gain on derivative contract		(1,399,000	)		(2,798,000	)

Total deferred tax liabilities		(10,147,000	)		(7,682,000	)

Valuation allowance		(22,916,000	)		(15,600,000	)

Net deferred taxes	$	—		$	—