Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.2.2
INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 13. INCOME TAXES

 

There was no provision for income taxes for 2021 and 2020 due to net operating losses and loss carry forwards and doubt as to the entity’s ability to continue as a going concern resulting in a 100% valuation allowance. Years from 2016 forward are open to examination by tax authorities in the United States. Years from 2019 forward are open to examination by Canadian tax authorities.

 

The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate of 21% (2019 – 21%) on operations due primarily to permanent differences attributable to organizational expenses.

 

    Fiscal Year Ended
December 31, 2021		     Fiscal Year Ended
December 31, 2020		  
             
Income tax (benefit) expense computed at statutory rates   $

405,000

   $ (2,078,000 )
Non-deductible items    

49,000

       85,000  
Change in statutory, foreign tax, foreign exchange rates and other    

(559,000

 )     (2,427,000 )
Change in valuation allowance    

(105,000

 )     4,420,000  
Total   $ —     $ —  

 

The significant components of the net deferred tax asset were as follows:

 

    2021     2020  
    December 31,  
    2021     2020  
Deferred tax assets              
Net operating loss carryforwards   $

6,038,000

     $ 5,772,000  
Asset retirement obligation    

498,000

       679,000  
Oil and gas properties    

(593,000

 )     (644,000 )
Property and equipment    

—

     6,000  
Other     —       —  
Total deferred tax assets (liabilities)    

5,943,000

       5,813,000  
Less: Valuation allowance    

(5,943,000

 )     (5,813,000 )
Net deferred tax assets (liabilities)   $ —     $ —  

 

A valuation allowance has been established to offset deferred tax assets. The Company’s accumulated net operating losses in the United States were approximately $2.2 million on December 31, 2021 and begin to expire if not utilized beginning in the year 2033. The Company’s accumulated non-capital tax losses in Canada were approximately $27.5 million on December 31, 2021 and will expire in 2039. The Tax Cuts and Jobs Act was signed into law on December 22, 2017 and reduced the corporate income tax rate from 34% to 21%. The Company’s deferred tax assets, liabilities, and valuation allowance have been adjusted to reflect the impact of the new tax law.