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TAXES | 12 Months Ended
--- | ---
Dec. 31, 2017
TAXES |
TAXES | NOTE 7. TAXES Income Taxes The Company’s income tax provision (benefit) consists of the following (in thousands):
|  | Years ended December 31, |
|  | 2017 |  | 2016 |  | 2015 |
Federal |  | $ | 9,933 |  | $ | 12,834 |  | $ | 11,968 |
State |  |  | 417 |  |  | 477 |  |  | 359 |
Current tax provision |  |  | 10,350 |  |  | 13,311 |  |  | 12,327 |
Federal |  |  | 3,738 |  |  | 99 |  |  | (1,117) |
State |  |  | 73 |  |  | (52) |  |  | 7 |
Deferred tax provision (benefit) |  |  | 3,811 |  |  | 47 |  |  | (1,110) |
Total tax provision |  | $ | 14,161 |  | $ | 13,358 |  | $ | 11,217 |
In conformity with ASU 2016-09, adopted in 2017, all excess tax benefits and deficiencies are recognized as income tax expense in the Company’s Consolidated Statement of Operations. This will result in increased volatility in the Company’s effective tax rate. The income tax provision differs from that computed at the federal statutory rate as follows:
|  | Years ended December 31, |  |
|  | 2017 |  | 2016 |  | 2015 |  |
Federal tax at the statutory rate |  | 35.00 | % | 35.00 | % | 35.00 | % |
State tax (net of federal benefit) |  | 1.00 | % | 0.70 | % | 0.72 | % |
Permanent items |  | 0.34 | % | 0.27 | % | 0.34 | % |
Tax credits |  | (0.82) | % | (0.96) | % | (0.73) | % |
Excess tax benefits on stock-based compensation |  | (3.42) | % | — | % | — | % |
Tax Cuts and Jobs Act of 2017 |  | 3.57 | % | — | % | — | % |
Other |  | — | % | 0.23 | % | (0.14) | % |
|  | 35.67 | % | 35.24 | % | 35.19 | % |
The effective tax rate increased slightly in 2017 compared to 2016 due to the revaluation of the deferred tax asset for the prospective federal tax rate change in 2018, partially offset by the excess tax benefits on stock-based compensation that, subsequent to the adoption of the ASU 2016-09 in first quarter of 2017, was recognized as a tax expense. The Tax Cuts and Jobs Act Bill (the “Tax Act”) was enacted on December 22, 2017, and permanently reduces the U.S. federal corporate tax rate to a flat rate of 21%. The changes included in the Tax Act are broad and complex. The final transition impacts of the Tax Act may differ from our current estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition impacts. At December 31, 2017, we have not completed our accounting for the tax effects of enactment of the Tax Act; however, we have made a reasonable estimate of the effect on our existing deferred tax balance. Based on our reasonable estimate, we recognized a provisional amount of $1,461 thousand, which is included as a component of income tax expense. In all cases, we will continue to make and refine our calculations as additional analysis is completed. The Company recorded $737 thousand and $865 thousand as increases to contributed capital from certain tax benefits for employee stock-based compensation for the years ended December 31, 2016 and 2015, respectively. In 2017, subsequent to the adoption of the ASU 2016-09 the $1,359 thousand tax benefit for employee stock-based compensation was recorded to the tax expense. The components of the deferred income tax assets and liabilities at December 31, 2017 and 2016, as presented in the consolidated balance sheets, are as follows (in thousands):
|  | 2017 |  | 2016 |
DEFERRED TAX ASSETS |  |  |  |  |  |  |
Stock-based compensation |  | $ | 1,434 |  | $ | 2,198 |
Compensation and benefits |  |  | 555 |  |  | 1,113 |
Bad debt reserves |  |  | 58 |  |  | 136 |
Accrued expenses |  |  | 512 |  |  | 1,991 |
Fixed assets and depreciation |  |  | 896 |  |  | 2,305 |
Base stock |  |  | 11 |  |  | 6 |
State taxes |  |  | (31) |  |  | 144 |
NOLs & credit carry-forwards |  |  | 2,219 |  |  | 3,295 |
Deferred income tax asset |  | $ | 5,654 |  | $ | 11,188 |
DEFERRED TAX LIABILITIES |  |  |  |  |  |  |
Intangibles and amortization |  | $ | (855) |  | $ | (1,811) |
Prepaid expenses |  |  | (890) |  |  | (1,365) |
Real estate taxes |  |  | (191) |  |  | (154) |
Other reserves |  |  | (14) |  |  | (138) |
Federal deduction on deferred state taxes |  |  | (160) |  |  | (366) |
Deferred income tax liability |  | $ | (2,110) |  | $ | (3,834) |
NET DEFERRED INCOME TAX ASSET |  | $ | 3,544 |  | $ | 7,354 |
As of December 31, 2017, the Company had $4.8 million of federal net operating loss (“NOL”) carryforwards, general business credit (“GBC”) carryforwards of $0.3 million and $18.4 million of state NOL carryforwards, acquired as part of the Monarch Casino Black Hawk (formerly Rivera Black Hawk) acquisition. The federal NOL carryforwards expire in 2022 through 2032. The federal GBC carryforwards expire in 2023 through 2032. The state NOL carryforwards expire in 2022 through 2032. The acquired federal and state NOL and federal GBC carryforwards are subject to Internal Revenue Code change of ownership limitations. Accordingly, future utilization of the carryforwards is subject to an annual base limitation of $1.25 million that can be applied against future taxable income. The Company acquired NOLs of Monarch Black Hawk generated in tax years 2000 through 2012. The statute of limitation for assessment for these NOL years is determined by reference to the year the NOL is used to reduce taxable income. Consequently, the separate returns that included Monarch Black Hawk remain subject to examination by the Internal Revenue Service (the “IRS”). The Company’s income tax returns from 2014 forward are subject to examination by the IRS. 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 uncertain tax positions is to classify such amounts as income tax expense. No uncertain tax positions were recorded as of December 31, 2017, 2016 and 2015. No change in uncertain tax positions is anticipated over the next twelve months. No interest expense or penalties for uncertain tax positions were recorded for years ended December 31, 2017, 2016 and 2015.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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