NOTE 10 - INCOME TAXES

12 Months Ended

Dec. 31, 2022

Notes

NOTE 10 - INCOME TAXES

NOTE 10 – INCOME TAXES

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company used an effective tax rate of 21% when calculating the deferred tax assets and liabilities and income tax provision below.

Net deferred tax assets consist of the following components as of December 31, 2022 and 2021:

	2022		2021
Deferred tax assets:
Net operating loss carryforward	$	737,300	$	904,200
Accrued payroll		184,300		184,000
Accumulated depreciation		52,000		98,700
Valuation allowance		(973,600)		(1,186,900)
	$	-	$	-

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2022 and 2021 due to the following:

	2022		2021
Book income (loss)	$	(93,000)	$	(204,900)
Depreciation		(5,600)		(6,300)
Meals and entertainment		200		-
Other non-deductible expenses		77,800		83,300
Payroll Expense		35,700		35,700
Excess book gain on disposal over tax		(22,100)		-
Valuation allowance		7,000		92,200
	$	-	$	-

As of December 31, 2022, the Company has federal and state net operating loss carryforwards of approximately $3,511,000 that may be offset against future taxable income beginning in 2022 through 2041. No tax benefit has been reported in the December 31, 2022 consolidated financial statements since the potential tax benefit is offset by a valuation allowance for the same amount.  Tax years that remain subject to examination are 2018 and forward.

Utilization of the NOL carryforwards might be subject to an annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state and foreign provisions. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than fifty percentage points of the outstanding stock of a company by certain stockholders or public groups. Since the Company’s formation, the Company has raised capital through the issuance of common stock on several occasions which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such an ownership change, or

could result in an ownership change in the future upon subsequent disposition.

The Company has not completed a study to assess whether an ownership change has occurred. If the Company has experienced an ownership change, utilization of the NOL carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOL carryforwards before utilization. Further, until a study is completed, and any limitation is known, no amounts are considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization because of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance.