Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

5. Income Taxes

The cumulative estimated net operating loss (“NOL”) carry-forward is $37,312,984 and $31,347,786 at December 31, 2022 and 2021, respectively. $22,935,645 of this carry-forward may be carried forward indefinitely while $14,377,339 is subject to expiration over a 20-year period. EVTDS recognized a cumulative tax benefit of $218,300 on its financial statements through the year ended December 31, 2020, and therefore did not reserve the deferred tax asset. As mentioned in Note 2, that benefit has been reversed and recorded as income tax expense in the consolidated results of operations for the year ended December 31, 2021, effectively establishing a valuation allowance for it. Due to the enactment of the Tax Cuts and Jobs Act of 2017, the corporate tax rate for those tax years beginning with 2018 has been reduced to 21%. Therefore, the cumulative tax effect of the NOL carryforward at the expected rate of 21% comprising the Company’s net deferred tax amount is as follows:

	December 31,
	2022			2021
Tax effected net operating loss	$	1,169,392		$	866,991
Deferred tax asset attributable to:
Net operating loss carryover		6,666,335			5,716,044
Research and development tax credit carryforward		274,891			274,891
Sub-total		8,110,618			6,857,926
Valuation allowance		(8,110,618	)		(6,857,926	)
Net deferred tax asset	$	—		$	—
Cumulative NOL	$	37,312,984		$	31,347,786

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryover for federal income tax reporting purposes are subject to annual limitations. The net operating loss carry-forward includes the years 2012 through 2022 for the Envirotech Vehicles, Inc./ADOMANI, Inc. losses, and includes the years 2014 through 2020 for EVTDS, as the 2021 EVTDS loss is included in the consolidated Envirotech Vehicles, Inc. loss. Because a change in ownership occurred as a result of the Merger, net operating loss carryover will be limited as to use in future years. Federal tax returns for tax years since 2019 are still open for examination by the Internal Revenue Service.