NOTE 13 — INCOME TAX

The Company has a net operating loss carryforward for federal tax purposes totaling approximately $44.8 million at April 30, 2022. Approximately $13.2 million expires through the year 2038, with approximately $31.6 million net operating losses incurred after December 31, 2017 that do not expire and can be utilized to offset up to 80% of future taxable income under the Tax Cuts and Jobs Act described below. The Company has approximately $7.2 million of various state net operating loss carryforwards that expire through the year 2038; however, the majority of the Company’s business is currently conducted in the states of Wyoming and Nevada which don’t have state income taxes, so these carryforwards may never be used.

The deferred tax assets and deferred tax liabilities are summarized as follows:

 SCHEDULE OF NET DEFERRED TAX ASSET AND LIABILITIES

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company completed the accounting for the effects of the Act during the fiscal year April 30, 2019. The Company recognized an income tax benefit of $438,145 for the year ended April 30, 2020 as a result of the changes to tax laws and tax rates under the Act. The Act modified the application of alternative minimum tax credits previously being carried forward, to allow for refunds of the credits. The Company had been carrying forward a total of $438,000 in alternative minimum tax credits. As a result of the change, the Company received partial federal tax refund during the fiscal year ended April 30, 2021.

The Company will amend its fiscal year 2018 and 2019 tax returns to deduct capitalized exploration expenses that should have been deducted under the Act. Such impact has been updated on the tax provision. The effect of those amendments will increase total deductions by approximately $755,000, with a like increase to the net operating loss carryforwards when they are completed. The tax effect on the deferred tax assets will be an increase of approximately $159,000 which have been included in the tax provision. The Company will file the amended fiscal year 2018 and 2019 tax returns before the end of the year.

On August 10, 2020, the Company acquired mineral rights totaling $10,249,632 (see Note 4 – Mineral Rights) in a tax-free reorganization pursuant to IRS Section 368. The Company recorded the assets at fair value for financial reporting purposes and retained the seller’s tax basis which was zero resulting in a deferred tax liability on the business combination date. As required by ASC 740, the Company has recognized the deferred tax impact of acquiring the mineral rights asset in this transaction, with the amount paid exceeding the tax basis of the asset on the acquisition date. This deferred tax liability partially offsets the deferred tax assets recognized by the Company resulting in a carryover tax basis equal to zero.

U.S. GOLD CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2022

As of April 30, 2022, the Company had deferred tax assets and liabilities arising principally from the acquisition of the mineral rights described above and the net operating loss carryforward for income tax purposes, multiplied by an expected blended federal and state tax rate of 21.0%. The Company primarily operates in the states of Wyoming and Nevada which do not impose a corporate income tax. Any minor apportionment that may occur to any taxable state will be immaterial to current and future operations of the Company and as such the state’s net operating loss carryforward have been fully offset with in the valuation allowance. Therefore, the effective state tax rate used in the calculation of deferred tax is 0%. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefits of the deferred tax assets, a valuation allowance equal to 100% of the net deferred tax asset has been established at April 30, 2022.

The differences between the provision (benefit) for federal income taxes and federal income taxes computed using the U.S. statutory tax rate of 21% were as follows:

 SCHEDULE OF EFFECTIVE TAX RATE

The Company has assessed its tax positions and has determined that it has not taken a position that would give rise to an unrecognized tax liability being reported. In the event that the Company is assessed penalties and/or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.

The Company operates exclusively in the United States and in various state jurisdictions but primarily in the states of Wyoming and Nevada. For both federal and state income tax purposes, the Company’s fiscal 2019 through 2022 tax years remain open for examination by the tax authorities under the  general three-year statute of limitations.