| INCOME TAXES |
NOTE 16 – INCOME TAXES
For the years ended December 31, 2020, 2019 and 2018, components of our provision for income taxes are as follows:
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Provision for (Benefit from) Income Taxes |
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2020 |
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2019 |
|
2018 |
Deferred taxes |
|
$ |
(6,001,176) |
|
$ |
13,787,654 |
|
$ |
3,445,721 |
Provision for (Benefit from) Income Taxes |
|
$ |
(6,001,176) |
|
$ |
13,787,654 |
|
$ |
3,445,721 |
The following is a reconciliation of income taxes computed using the U.S. federal statutory rate to the provision for income taxes:
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Rate Reconciliation |
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2020 |
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2019 |
|
2018 |
Tax at federal statutory rate |
|
$ |
(54,476,731) |
|
$ |
9,089,683 |
|
$ |
2,613,551 |
Non-deductible expenses |
|
|
956 |
|
|
2,399 |
|
|
3,197 |
Excess tax benefit from stock option exercises and restricted stock vesting |
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|
(1,109,379) |
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|
4,055,418 |
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|
828,973 |
Adjust prior estimates to tax return |
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|
(4,754) |
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|
19 |
|
|
— |
States taxes, net of Federal benefit |
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|
(964,393) |
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|
160,913 |
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|
— |
Adjustment for change in future effective tax rate (1) |
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— |
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|
479,222 |
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|
— |
Valuation allowance (2) |
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|
50,553,125 |
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|
— |
|
|
— |
Provision for Income Taxes |
|
$ |
(6,001,176) |
|
$ |
13,787,654 |
|
$ |
3,445,721 |
| (1) |
The acquisition of the Northwest Shelf assets from Wishbone included properties in the State of New Mexico. The tax rates associated with the State of New Mexico adjusted our overall tax rate from 21% to 21.29%. This resulted in an additional tax expense during the year ended December 31, 2019 of $479,222.
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| (2) |
As a result of the ceiling test impairments recorded in 2020, a benefit from income tax provision was recorded resulting in a deferred tax asset. The Company recorded a full valuation allowance against the deferred tax asset of $50,553,125.
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The net deferred taxes consisted of the following as of December 31, 2020 and 2019:
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Deferred Taxes: |
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2020 |
|
2019 |
Deferred tax liabilities |
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|
|
|
|
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Property and equipment |
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$ |
5,357,255 |
|
$ |
56,325,029 |
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Deferred tax assets |
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|
|
|
|
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Stock-based compensation |
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2,248,272 |
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|
269,264 |
Operating loss and IDC carryforwards |
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3,108,983 |
|
|
50,054,589 |
Deferred tax assets |
|
|
5,357,255 |
|
|
50,323,853 |
Net deferred income tax liability |
|
$ |
— |
|
$ |
6,001,176 |
As of December 31, 2020, the Company had net operating loss carry forwards for federal income tax reporting purposes of approximately $107.4 million which, if unused, will begin to expire in 2027 and fully expire in 2038 and an additional $150.2 million that will not expire.
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