3.INCOME TAXES



A reconciliation between income taxes computed at the statutory federal income tax rate and the effective tax rate for the years ended December 31, 2017 and 2016 is as follows:





On December 22, 2017, the U.S. Tax Cuts and Jobs Act ("TCJA") was signed into law. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. The Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the highest U.S. corporate tax rate of 35% to a flat 21% effective for tax years starting after December 31, 2017. As a result, we recorded a tax benefit of $1,345,000 in the fourth quarter as a result of a revaluation of the net deferred tax liabilities due to the corporate tax rate change from 34% to 21% starting in 2018. The provisional amounts incorporate assumptions made based upon the Company's current interpretation of the Tax Act and may change as the Company receives additional clarification and implementation guidance.



Income tax expense for the years ended December 31, 2017 and 2016 consists of the following:







Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 



Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2017 and 2016 are as follows:





The Company is subject to U.S. and Minnesota taxation.  The Company is no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2014.