4. 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, 2019 and 2018 is as follows:


	2019		2018
Federal tax expense at statutory rates	$	928,000	$	1,618,800
Nondeductible lobbying expense		15,100		15,100
State expense, net of federal impact		316,000		615,300
Stock option expense		(14,200)		(74,200)
Federal deferred remeasurement		—		(175,600)
Other		(637)		(9,400)
	$	1,244,263	$	1,990,000

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 $175,600 in the fourth quarter of 2018 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.

Income tax expense for the years ended December 31, 2019 and 2018 consists of the following:


	2019		2018
Current
Federal	$	449,000	$	290,000
State		361,000		732,000
		810,000		1,022,000
Deferred, Federal		479,263		1,164,000
Deferred, State		(45,000)		(196,000)
	$	1,244,263	$	1,990,000

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, 2019 and 2018 are as follows:


	2019		2018
Deferred tax assets (liabilities)
Vacation accrual	$	72,800	$	62,500
Player rewards program accrual		143,200		136,200
Stock options		75,100		37,400
Long-Term Incentive Plan		114,300		126,800
Other		5,500		5,600
Land, building and equipment - cost and depreciation		(4,062,800)		(3,507,500)
Investment in JV		(729,000)		(729,000)
Prepaid Expenses		(7,700)		(102,000)
TIF receivable accrued interest		(43,600)		—
Lease Obligations		27,900		—
Net long-term deferred tax liabilities	$	(4,404,300)	$	(3,970,000)

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 2016.