16. Income Taxes
|9 Months Ended|
Sep. 30, 2018
|Income Tax Disclosure [Abstract]|
Note 16 – Income Taxes
The Company accounts for income taxes under ASC Topic 740, Income Taxes, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
BROG and BRAC file returns independently and do not file as a consolidated group. We currently estimate that our effective tax rate for the year ending December 31, 2018 will be 0% for BROG and 28.7% for BRAC.
For BROG, losses incurred during the period from April 9, 2011 (inception) to September 30, 2018 could be used to offset future tax liabilities. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As of September 30, 2018, net deferred tax assets were $9,619,748, with no deferred tax liability, primarily related to net operating loss carryforwards. A valuation allowance of approximately $9,619,748 was applied to the net deferred tax assets. Therefore BROG has no tax expense for 2018 to date.
For BRAC, the tax expense for the nine months ended September 30, 2018 of $398,752 was primarily driven by the Company’s interest income offset by general and administrative expenses resulting in income before the provision for income taxes. Unrealized gains on marketable securities resulted in a reduction of the deferred tax asset of $18,678 as of December 31, 2017 and created the deferred tax liability of $182 as of September 30, 2018.
In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no significant uncertain tax positions as of any date on, or before, September 30, 2018.
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://fasb.org/us-gaap/role/ref/legacyRef