NOTE 14. DEFERRED TAXES

The income tax was $0 as of December 31, 2019 and 2018.

Significant components of the Company’s deferred tax assets at December 31, 2019 and 2018 are shown below. A valuation allowance has been established as realization of such deferred tax assets has not met the more likely-than-not threshold requirement. The increase in the valuation allowance in 2019 represents the increase in deferred tax assets that the Company has determined is not more likely than not of being recovered. If the Company’s judgment changes and it is determined that the Company will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense.

The components of net deferred tax assets are as follows:


	December 31,
	2019		2018
	(Restated)
Net operating loss carryforwards	$	7,116,767	$	5,383,012
Equity-based instruments		5,810,660		5,004,624
Long-lived assets and other		491,730		555,138
Capital loss carryforward		120,318		—
Deferred tax asset valuation allowance		(13,539,475)		(10,942,774)
	$	—	$	—

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:


	Year ended December 31,
	2019		2018
	(Restated)
Income tax benefit at statutory rate	$	(3,251,597)	$	(3,564,489)
State income tax benefit, net of Federal benefit		(566,351)		(620,849)
Equity-based instruments		146,446		(326,242)
Fair market value adjustment/loss on extinguishment – derivative liabilities		636,532		—
Amortization of debt discount		498,018		1,044,210
Other		(59,749)		47,895
Valuation allowance		2,596,701		3,419,475
	$	—	$	—

As of December 31, 2019 and 2018, the Company had federal and state net operating loss carryforwards of approximately $29 million and $22 million, respectively. Of the current net operating loss carryforwards, $14 million expire starting in 2033 through 2037 and $15 million do not expire.

Pursuant to the Internal Revenue Code Sections 382 and 383, use of the Company’s U.S. federal and state net operating loss carryforwards may be limited in the event of a cumulative change in ownership of more than 50% within a three-year period.