NOTE 15 – INCOME TAXES 

The Company files federal income tax returns in the U.S. and state income tax returns in the applicable states on a consolidated basis. The Company’s subsidiaries also file the equivalent returns in the appropriate foreign jurisdictions, as applicable, most notably the United Kingdom.

The Company is required to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. There are no material uncertain tax positions included in the accompanying unaudited consolidated financial statements at July 31, 2019 and the audited consolidated financial statements at October 31, 2018.

The Company uses an asset and liability approach to financial accounting and reporting for income taxes. The difference between the financial statement and tax bases of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce the deferred tax asset to the amount that will more likely than not be realized. Income tax expense is the current income tax payable or refundable for the period plus or minus the net change in the deferred tax assets and liabilities.

We have federal tax Net Operating Loss (“NOL”) carryforwards of $8,353,186 as of October 31, 2018 which will expire at various dates in the next 20 years. Such NOL carryforwards expire as follows:

We believe that it is more likely than not that the benefit from certain federal NOL carryforwards will be realized. The federal NOL carryforwards in the income tax returns filed included unrecognized tax benefits taken in prior years. A portion of the carryforwards may expire before being applied to reduce future income tax liabilities.

The deferred tax asset related to the U.S. tax carryforward is $903,182 and was $1,754,169 as of July 31, 2019 and October 31, 2018 respectively. For the nine months ended July 31, 2019 the Company had an Alternative Minimum Tax refund of $77,754 and for the year ended October 31, 2018 had an Alternative Minimum Tax of $7,840.

Components of deferred tax assets as of July 31, 2019 and October 31, 2018 are as follows:

The Company did not incur any regular income tax but did incur an Alternative Minimum Tax expense in the U.S. for the year ended October 31, 2018. For financial purposes in its U.S. entities and other foreign entities not included above, the Company has been able to use net operating loss carryforwards and other timing differences during the current and prior year to offset any tax liabilities in the various tax jurisdictions.

The Company’s income tax returns are subject to audit by taxing authorities for the years ending October 31, 2016.