|12 Months Ended|
Dec. 31, 2017
|Income Tax Disclosure [Abstract]|
A reconciliation of the federal statutory income tax provision to the Company's actual provision for the years ended December 31, 2017 and 2016 is as follows:
The components of net deferred tax assets recognized in the accompanying consolidated balance sheets at December 31, 2017 and 2016 are as follows:
At December 31, 2017, the Company had approximately $30,982,000 of Federal Loss Carryforwards that expire beginning in the year 2021 through 2037. In addition, the Company has varying amounts of state net operating losses, expiring at various dates starting in 2018 through 2037.
The Tax Cuts and Jobs Act was enacted on December 22, 2017. A significant provision of the act was to reduce the statutory Federal tax rate from 34% to 21%. During 2017, the Company’s valuation allowance increased by $277,000. This increase is net of a $4,747,000 decrease attributable to the reduction in tax rates, and was otherwise significantly affected by the absorption of deferred tax attributes associated with its acquisition of American DG Energy, Inc.
In accordance with the provisions of the Income Taxes topic of the Codification, the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating losses. Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets and, as a result, a full valuation allowance has been established for 2016 and 2017 respectively.
Utilization of the NOL and research and development credit carryforwards are subject to a substantial annual limitation due to ownership changes, as provided by Section 382 of the Internal Revenue Code of 1986, as well as similar state provisions. Ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.
The Company acquired a new subsidiary, American DG Energy, Inc. during 2017, by acquiring 100 percent of the company's stock. Accordingly, utilization of their consolidated and/or separately computed NOL and/or tax credit carryforwards will be subject to an annual limitation under Internal Revenue Code Section 382. Any such limitation may
result in expiration of a portion of the NOL or tax credit carryforwards before utilization. The extent of the limitation, and related allocation and impact upon the NOL and credit carryforwards, has not been determined as of the financial statement reporting date.
A full valuation allowance has been provided against the Company's loss carryforwards and, if an adjustment is required under Section 382, it would be offset by a corresponding adjustment to the valuation allowance. Thus, there would be no impact to the balance sheet or statement of operations if an adjustment were required.
The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2017 or 2016.
The Company files tax returns as prescribed by the tax laws of the jurisdiction in which it operates. In the normal course of business the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company is thus still open to examination from tax year 2014 for both federal and state jurisdictions.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef