Epsilon Energy Ltd
For the period ended Mar 31, 2024. Filed May 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 8, 2024
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9. Income Taxes
Income tax provisions for the three ended March 31, 2024 and 2023 are as follows:
| | | | | | | |
|---|---|---|---|---|---|---|
| · · Three months ended March 31, | ||||||
| | 2024 | 2023 | ||||
| Current: | | | | | | |
| Foreign | | $66,268 | | $— | ||
| Federal | | | — | | | 960,508 |
| State | | | 10,775 | | | 378,522 |
| Total current income tax expense | | | 77,043 | | | 1,339,030 |
| Deferred: | | | | | | |
| Federal | | | 377,599 | | | (17,278) |
| State | | | (400,592) | | | 5,170 |
| Total deferred tax expense | | | (22,993) | | | (12,108) |
| Income tax expense | | $54,050 | | $1,326,922 | ||
The Company files federal income tax returns in the United States and Canada, and various returns in state and local jurisdictions.
The Company believes it has no uncertain income tax positions. The Company's tax returns are open to audit under the statute of limitations for the years ending December 31, 2020 through December 31, 2023. To the extent we utilize net operating losses generated in earlier years, such earlier years may also be subject to audit.
Starting in 2023, distributions of Epsilon Energy USA Inc. earnings to Epsilon Energy Ltd. incur a 5% U.S. dividend withholding tax, provided the Company is eligible for benefits under the U.S. / Canada income treaty.
Our effective tax rate will typically differ from the statutory federal rate primarily as a result of state income taxes and the valuation allowance against the Canadian net operating loss. The effective tax rate for the three months ended March 31, 2024 was lower than the statutory federal rate as a result of state income taxes partially offset by the valuation allowance against the Canadian net operating loss.
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