TAXES

12 Months Ended

Dec. 31, 2023

TAXES

TAXES

NOTE 7. TAXES

Income Taxes

The Company’s income tax provision (benefit) consists of the following (in thousands):

	Years ended December 31,
	2023		2022		2021
Federal	$	23,312	$	16,379	$	10,091
State		2,699		1,765		265
Current tax provision		26,011		18,144		10,356
Federal		(21)		3,009		4,836
State		89		390		1,691
Deferred tax provision		68		3,399		6,527
Total tax provision	$	26,079	$	21,543	$	16,883

In conformity with the ASC 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 (income tax benefit) in the Company’s Consolidated Statement of Income. 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,
	2023		2022		2021
Federal tax at the statutory rate	21.00	%	21.00	%	21.00	%
State tax (net of federal benefit)	1.96	%	1.58	%	1.47	%
Permanent items	1.85	%	1.47	%	0.38	%
Tax credits	(0.35)	%	(0.36)	%	(0.25)	%
Excess tax benefits on stock-based compensation	(0.41)	%	(4.31)	%	(3.14)	%
Change in Tax Rate and Apportionment	0.02	%	(0.02)	%	0.34	%
Other	(0.04)	%	0.40	%	(0.02)	%
	24.03	%	19.76	%	19.78	%

The effective tax rate varies year-over-year primarily based on the amount of the excess tax benefit on stock compensation. In 2023, 2022 and 2021, the Company recorded against the tax expense $0.4 million, $4.7 million and $2.7 million tax benefit for employee stock-based compensation, respectively. In 2023, the effective tax rate is greater than the federal statutory tax rate of 21% primarily as a result of state tax and permanent items of $2.1 million and $2.0 million, respectively. In 2022 and 2021, the effective tax rate is below the statutory rates due primarily to excess tax benefits on stock compensation.

The components of the deferred income tax assets and liabilities at December 31, 2023 and 2022, as presented in the consolidated balance sheets, are as follows (in thousands):

	2023		2022
DEFERRED TAX ASSETS
Stock-based compensation	$	3,489	$	2,613
Compensation and benefits		761		817
Accrued expenses		701		472
Right of use lease liability		3,513		3,247
Federal deduction on state taxes		429		410
Bad debt reserves		17		13
Other reserves		95		67
NOLs & credit carry-forwards		498		636
Deferred income tax asset	$	9,503	$	8,275
DEFERRED TAX LIABILITIES
Prepaid expenses	$	(1,907)	$	(1,811)
Fixed assets and depreciation		(27,103)		(26,173)
Right of use asset		(3,490)		(3,249)
Base stock		(87)		(58)
Deferred income tax liability	$	(32,587)	$	(31,291)
NET DEFERRED INCOME TAX LIABILITY	$	(23,084)	$	(23,016)

As of December 31, 2023, the Company has state net operating loss (“NOL”) carryforwards of $10.9 million. The Company has utilized all federal NOL carryforwards. The state NOL carryforwards expire in 2030 through 2040.

The state NOL of $10.9 million, acquired as part of the Monarch Black Hawk acquisition, is 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 for 2008 through 2012 remain subject to examination by taxing authorities. The Company’s income tax returns from 2020 forward are subject to examination by the taxing authorities.

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, 2023, 2022 and 2021. 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, 2023, 2022 and 2021.