Income Taxes

3 Months Ended

Dec. 31, 2011

Notes to Financial Statements

7. Income Taxes

7.  Income Taxes

The Company recognizes deferred tax assets and liabilities for future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates applicable to the years in which those differences are expected to be settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in net income in the period that includes the enactment date.

The income tax provision consists of the following for the three and nine months ended December 31, 2011 and 2010:

	Three Months Ended						Nine Months Ended
	December 31						December 31
	2011			2010			2011			2010
Current income tax expense (benefit)	$	(4,858	)	$	(59,500	)	$	124,880		$	(25,502	)
Deferred income tax expense (benefit)		11,927			85,561			(50,109	)		(14,599	)
Total income tax provision:	$	7,069		$	26,061		$	74,771		$	(40,101	)
Effective tax rate		12	%		49	%		24	%		(64	%)

As of December 31, 2011, the Company has a statutory depletion carryforward of approximately $4,000,000, which does not expire.  At December 31, 2011, there was a net operating loss carryforward for regular income tax reporting purposes of approximately $1,800,000, which will begin expiring in 2021.  The Company’s ability to use the net operating loss carryforward and certain other tax attributes to reduce current and future U.S. federal taxable income is subject to limitations under the Internal Revenue Code.

Any interest and penalties related to uncertain tax positions are recorded as interest expense and general and administrative expense, respectively.  As of December 31, 2011, the Company had unrecognized tax benefits of approximately $550,000.