NOTE 6 - INCOME TAXES
Income taxes recorded in our consolidated statements of income consists of the following:
| 2017 | 2016 | ||||
| Taxes currently payable |
|
|
|
|
|
| Federal | $ | 4,055,693 | $ | 2,582,782 | |
| State |
| 1,136,733 |
|
| 685,800 |
| Deferred Income Taxes | (1,446,409) | (1,235,442) | |||
| Deferred Tax Adjustment due to Federal Tax Rate Change |
| (4,549,332) |
|
| - |
| Total Income Tax Expense (Benefit) | $ | (803,315) | $ | 2,033,140 | |
We account for income taxes in accordance with GAAP. As required by GAAP, we recognize the financial statement benefit of tax positions only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
As of December 31, 2017 we had no unrecognized tax benefits.
We are primarily subject to United States, Minnesota, Nebraska and Iowa income taxes. Tax years subsequent to 2013 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of December 31, 2017 and 2016, we had no interest or penalty accrued that related to income tax matters.
The differences between the statutory federal tax rate and the effective tax rate were as follows:
| 2017 | 2016 | ||||
| Statutory Tax Rate | 35.00 | % |
| 35.00 | % |
| Effect of: | |||||
| Federal Rate Change | (49.68) |
|
| - |
|
| Surtax Exemption | (0.80) | (1.00) | |||
| State Income Taxes Net of Federal Tax Benefit | 7.21 |
|
| 7.60 |
|
| Permanent Differences and Other, Net | (0.51) |
|
| - |
|
| Effective tax rate | (8.78) | % | 41.60 | % | |
Deferred income taxes and unrecognized tax benefits reflected in our consolidated balance sheets are summarized as follows:
| 2017 | 2016 | ||||
| Deferred Tax (Assets) / Liabilities |
|
|
|
|
|
| Accrued Expenses | $ | (425,040) | $ | (636,600) | |
| Other |
| (47,184) |
|
| (93,639) |
| Fixed Assets | 6,560,307 | 10,143,817 | |||
| Intangible Assets |
| 3,790,342 |
|
| 6,335,077 |
| Deferred Compensation | (196,826) | (306,810) | |||
| Partnership Basis |
| 637,090 |
|
| 872,586 |
| Total Deferred Tax Liability | $ | 10,318,689 | $ | 16,314,431 | |
On December 22, 2017, the President of the United States signed into law, the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant changes in United States tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the United States corporate tax rate from the current rate of 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the 21% rate. This revaluation resulted in a benefit of $4,549,332 to income tax expense in continuing operations and a corresponding reduction in the deferred tax liability. The other provisions of the Tax Cuts and Jobs Act did not have a material impact on the 2017 consolidated financial statements.