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INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2011
INCOME TAXES |
INCOME TAXES |
NOTE 6. INCOME TAXES Income tax provision (benefit) consists of the following:
|  | Years ended December 31, |
|  | 2011 |  | 2010 |  | 2009 |
Current provision |  | $ | 4,683,711 |  | $ | 4,443,536 |  | $ | 402,156 |
Deferred (benefit) provision |  | (1,503,638 | ) | (104,612 | ) | 1,919,523 |
|  | $ | 3,180,073 |  | $ | 4,338,924 |  | $ | 2,321,679 |
Income tax benefits were recognized through stockholders’ equity of $0, $4,472 and $6,673 during the years of 2011, 2010 and 2009, respectively, as compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes. The difference between the Company’s provision for federal income taxes as presented in the accompanying consolidated statements of income, and the provision for income taxes computed at the statutory rate is comprised of the items shown in the following table as a percentage of pre-tax earnings.
|  | Years ended December 31, |
|  | 2011 |  | 2010 |  | 2009 |
Income tax at the statutory rate |  | 35.00 | % | 35.00 | % | 35.00 | %
Tax credits |  | (2.24 | )% | (1.52 | )% | (2.23 | )%
Adjustment to base jackpot liability |  | 2.09 | % | 0.00 | % | 0.00 | %
Other |  | 1.06 | % | 1.01 | % | (0.37 | )%
|  | 35.91 | % | 34.49 | % | 32.40 | %
The components of the deferred income tax assets and liabilities at December 31, 2011 and 2010, as presented in the consolidated balance sheets, are as follows:
|  | 2011 |  | 2010 |
DEFERRED TAX ASSETS |  |  |  |  |
Share based compensation |  | $ | 4,126,452 |  | $ | 3,555,103 |
Compensation and benefits |  | 440,268 |  | 506,897 |
Bad debt reserves |  | 459,496 |  | 857,751 |
Accrued gaming liabilities |  | 773,052 |  | 1,148,127 |
Accrued interest |  | 8,937 |  | 8,937 |
Accrued other |  | 298,631 |  | 384,769 |
Deferred income tax asset |  | $ | 6,106,836 |  | $ | 6,461,584 |
DEFERRED TAX LIABILITIES |  |  |  |  |
Depreciation |  | (5,537,132 | ) | (7,324,088 | )
Prepaid expenses |  | (785,328 | ) | (861,613 | )
Real estate taxes |  | (280,513 | ) | (275,658 | )
Deferred income tax liability |  | $ | (6,602,973 | ) | $ | (8,461,359 | )
NET DEFERRED INCOME TAX LIABILITY |  | $ | (496,137 | ) | $ | (1,999,775 | )
The Company is required to file a federal tax return only. As of December 31, 2011, tax years 2006 through 2010 were subject to examination by the Internal Revenue Service (the “IRS”). During 2009, the IRS began its field examination (the “Examination”) of the Company’s 2006, 2007 and 2008 tax returns. The issues for consideration in the Examination were temporary differences related to the appropriate recovery periods applicable to certain assets. In 2010, the Company received the results of the Examination of its 2006 through 2008 U.S. federal income tax returns and subsequently filed an appeal of the Examination findings with the Appellate Division of the IRS. In connection with that appeal, the Company agreed to extend the statute of limitations for its 2006, 2007 and 2008 tax returns to December 31, 2012 to allow the IRS adequate time to consider its response in the appeals process. The company believes that it will likely reach an agreement with the IRS with respect to the Examination within the next 12 months. Upon the settlement of these issues unrecognized tax benefits could decrease by $1,501,206 to $0. Accounting standards require that tax positions be assessed for recognition using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts. The Company’s policy regarding interest and penalties associated with any uncertain tax positions is to classify such amounts as income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in thousands):
|  | 2011 |  | 2010 |
Balance — Beginning of year |  | $ | 1,501,206 |  | $ | — |
Additions based on tax positions of the current year |  | — |  | — |
Additions based on tax positions of prior years |  | — |  | 1,501,206 |
Reductions for settlements |  | — |  | — |
Decreases due to lapses in statutes of limitations |  | — |  | — |
Balance — End of year |  | $ | 1,501,206 |  | $ | 1,501,206 |
As of December 31, 2011 and 2010, the Company recorded a liability related to uncertain tax positions of $1,501,206 all of which is recorded as a current liability. For the years ending December 31, 2011 and 2010, the Company recognized accrued interest expense related to unrecognized tax benefits of $165,871 and $169,788, respectively. At December 31, 2011, accrued interest related to unrecognized tax benefits was $335,659. No interest or penalties were recorded for the year ending December 31, 2009.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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