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TAXES | 12 Months Ended
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Dec. 31, 2019
TAXES |
TAXES | NOTE 8. TAXES Income Taxes The Company’s income tax provision (benefit) consists of the following (in thousands):
|  | Years ended December 31, |
|  | 2019 |  | 2018 |  | 2017 |
Federal |  | $ | 6,080 |  | $ | 8,680 |  | $ | 9,933 |
State |  |  | 336 |  |  | 518 |  |  | 417 |
Current tax provision |  |  | 6,416 |  |  | 9,198 |  |  | 10,350 |
Federal |  |  | 1,215 |  |  | (659) |  |  | 3,738 |
State |  |  | 129 |  |  | 12 |  |  | 73 |
Deferred tax provision (benefit) |  |  | 1,344 |  |  | (647) |  |  | 3,811 |
Total tax provision |  | $ | 7,760 |  | $ | 8,551 |  | $ | 14,161 |
In conformity with the adopted in 2017 amendment to Topic 718, Compensation-Stock Compensation: Improvements to Employee Share-based Payment Accounting (ASU 2016-09), all excess tax benefits and deficiencies are recognized as income tax expense in the Company’s Consolidated Statement of Operations. This may 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, |  |
|  | 2019 |  | 2018 |  | 2017 |  |
Federal tax at the statutory rate |  | 21.00 | % | 21.00 | % | 35.00 | % |
State tax (net of federal benefit) |  | 1.00 | % | 0.99 | % | 1.00 | % |
Permanent items |  | 0.90 | % | 0.90 | % | 0.34 | % |
Tax credits |  | (0.84) | % | (1.08) | % | (0.82) | % |
Excess tax benefits on stock-based compensation |  | (2.49) | % | (1.94) | % | (3.42) | % |
Tax Cuts and Jobs Act of 2017 |  | — | % | — | % | 3.57 | % |
Other |  | 0.04 | % | 0.19 | % | — | % |
|  | 19.61 | % | 20.06 | % | 35.67 | % |
The effective tax rate decreased in 2019 and 2018 compared to 2017 is due to the change in the statutory rate as a result of the Tax Cuts and Jobs Act Bill (the “Tax Act”). This decrease was partially offset by the re-measurement of our deferred tax inventories in 2017 in relation with the reduction in the U.S. federal tax rate and the reduction in excess tax benefits on stock-based compensation. In 2019, 2018 and 2017, the Company recorded against the tax expense $1.0 million, $0.8 million and $1.4 million tax benefit for employee stock-based compensation, respectively. The components of the deferred income tax assets and liabilities at December 31, 2019 and 2018, as presented in the consolidated balance sheets, are as follows (in thousands):
|  | 2019 |  | 2018 |
DEFERRED TAX ASSETS |  |  |  |  |  |  |
Stock-based compensation |  | $ | 2,613 |  | $ | 2,018 |
Compensation and benefits |  |  | 623 |  |  | 466 |
Bad debt reserves |  |  | — |  |  | 1 |
Accrued expenses |  |  | 307 |  |  | 679 |
Fixed assets and depreciation |  |  | — |  |  | 1,048 |
Base stock |  |  | 4 |  |  | 4 |
Other reserves |  |  | 5 |  |  | — |
Right of use lease liability |  |  | 3,457 |  |  | — |
NOLs & credit carry-forwards |  |  | 1,444 |  |  | 1,761 |
Deferred income tax asset |  | $ | 8,453 |  | $ | 5,977 |
DEFERRED TAX LIABILITIES |  |  |  |  |  |  |
Intangibles and amortization |  | $ | (341) |  | $ | (600) |
Prepaid expenses |  |  | (1,354) |  |  | (1,067) |
Bad debt reserves |  |  | (32) |  |  | — |
Fixed assets and depreciation |  |  | (519) |  |  | — |
Real estate taxes |  |  | — |  |  | (180) |
Right of use asset |  |  | (3,454) |  |  | — |
Other reserves |  |  | — |  |  | (5) |
Federal deduction on deferred state taxes |  |  | (70) |  |  | (98) |
Deferred income tax liability |  | $ | (5,770) |  | $ | (1,950) |
NET DEFERRED INCOME TAX ASSET |  | $ | 2,683 |  | $ | 4,027 |
As of December 31, 2019, the Company had $2.4 million of federal net operating loss (“NOL”) carryforwards, general business credit (“GBC”) carryforwards of $0.3 million and $15.9 million of state NOL carryforwards, acquired as part of the Monarch Casino 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, 2019, 2018 and 2017. 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, 2019, 2018 and 2017.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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