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, 2016 and 2015 is as follows:


	2016		2015
Federal tax expense at statutory rates	$	2,445,273	$	1,569,667
Nondeductible lobbying expense		23,460		25,536
State expense, net of federal impact		477,566		312,950
Stock option expense		-		(910)
Other		(22,299)		(17,594)
	$	2,924,000	$	1,889,649

On December 31, 2015, the Company adopted ASU 2015-17 - Balance Sheet Classification of Deferred Taxes and all deferred taxes were prospectively recorded as non-current liabilities.

Income tax expense for the years ended December 31, 2016 and 2015 consists of the following:


	2016		2015
Current
Federal	$	666,857	$	932,257
State		242,043		321,992
		908,900		1,254,249
Deferred, Federal		1,684,100		538,600
Deferred, State		331,000		96,800
	$	2,924,000	$	1,889,649

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, 2016 and 2015 are as follows:


	2016		2015
Deferred tax liabilities
Vacation accrual	$	78,200	$	79,600
Player rewards program accrual		199,100		191,600
Stock options and stock appreciation rights		183,100		256,300
Tax depreciation greater than book depreciation		(3,772,000)		(2,408,400)
Deferred gain on sale of land		(410,000)		(453,800)
Land, building and equipment - cost and depreciation		(676,300)		-
Long-term incentive plan		29,700		-
Other		11,200		(7,200)
Net long-term deferred tax (liabilities) assets	$	(4,357,000)	$	(2,341,900)

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 2013.