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1996 ANNUAL REPORT |
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Notes to Consolidated Financial Statements |
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1996 ANNUAL REPORT |
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Notes to Consolidated Financial Statements |
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3. Provision for Income Taxes
The Omnibus Budget Reconciliation Act of 1993 (the "Act") was enacted on August 10, 1993. The Act contains several changes to federal income tax provisions, including an increase in the highest corporate tax rate from 34% to 35%, for companies with taxable income in excess of $10,000,000. The effect of the Act on income tax expense for the years ended December 31, 1996, 1995, 1994, and the Company’s net deferred tax liability was not material.
The following is an analysis of the consolidated income tax provision:
| Year ended December 31, | |||
| 1996 | 1995 | 1994 | |
| ------------ | ------------ | ------------ | |
| Current | $ 759,253 | $ (344,137) | $ 148,834 |
| Deferred | 9,001,080 | 2,326,162 | 963,324 |
| ------------ | ------------ | ------------ | |
| Total | $ 9,760,333 | $ 1,982,025 | $ 1,112,158 |
| ========= | ========= | ========= | |
There are differences between income taxes computed using the statutory rate (34% for 1996, 1995, and 1994) and the Company’s effective income tax rates (33.9%, 28.7%, and 23.0% for 1996, 1995, and 1994, respectively), primarily as the result of certain tax credits available to the Company. Reconciliations of income taxes computed using the statutory rate to the effective income tax rates are as follows:
| 1996 | 1995 | 1994 | |
| ------------ | ------------ | ------------ | |
| Income taxes computed at federal statutory rate | $ 9,787,166 | $ 2,344,143 | $ 1,644,862 |
| State tax provisions, net of federal benefits | 75,936 | 84,202 | 46,525 |
| Nonconventional fuel source credit | (306,000) | (370,000) | (435,016) |
| Depletion deductions in excess of basis | (26,520) | (34,000) | (30,895) |
| Other, net | 229,751 | (42,320) | (113,318) |
| ------------ | ------------ | ------------ | |
| Provision for income taxes | $ 9,760,333 | $ 1,982,025 | $ 1,112,158 |
| =========== | =========== | =========== |
The tax effects of significant temporary differences representing the net deferred tax liability at December 31, 1996, 1995, and 1994, were as follows:
| 1996 | 1995 | 1994 | |
| --------------- | --------------- | --------------- | |
| Deferred tax assets: | |||
| Alternative minimum tax credits | $ 1,517,470 | $ 1,372,978 | $ 900,562 |
| Other | -- | 115,332 | 7,112 |
| --------------- | --------------- | --------------- | |
| Total deferred tax assets | $ 1,517,470 | $ 1,488,310 | $ 907,674 |
| Deferred tax liabilities: | |||
| Oil and gas properties | $ 15,935,855 | $ 7,682,701 | $ 4,811,886 |
| Other | 875,572 | 650,283 | 614,300 |
| ---------------- | ---------------- | ---------------- | |
| Total deferred tax liabilitiess | $ 16,811,427 | $ 8,332,984 | $ 5,426,186 |
| ---------------- | ---------------- | ---------------- | |
| Net deferred tax liability1 | $ 15,293,957 | $ 6,844,674 | $ 4,518,512 |
| =========== | =========== | =========== |
1This amount includes current deferred tax asset amounts of $115,332 and $103,679 for 1995 and 1994, respectively.
The Company did not record any valuation allowances against deferred tax assets at December 31, 1996, 1995, and 1994.At December 31, 1996, the Company had an alternative minimum tax carryforward of $1,517,470 indefinitely available to reduce future regular tax liability to the extent it exceeds the related tentative minimum tax otherwise due.
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