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, 2014 and 2013 is as follows:


	2014		2013
Federal tax expense at statutory rates	$	1,394,793	$	587,367
Nondeductible lobbying expense		29,518		29,115
State expense, net of federal impact		280,263		128,146
Stock option expense		(364)		12,465
Other		(13,033)		(37,312)
	$	1,691,177	$	719,781

Income tax expense for the years ended December 31, 2014 and 2013 consists of the following:


	2014		2013
Current
Federal	$	1,070,360	$	179
State		307,117		156,002
		1,377,477		156,181
Deferred, primarily Federal		313,700		563,600
	$	1,691,177	$	719,781

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, 2014 and 2013 are as follows:


	2014		2013
Deferred tax assets
Vacation accrual	$	73,300	$	68,400
Player rewards program accrual		202,100		269,600
Stock options and stock appreciation rights		404,300		339,300
Total deferred tax assets	$	679,700	$	677,300

Deferred tax liabilities
Tax depreciation greater than book depreciation	$	(2,254,200)	$	(1,961,400)
Deferred gain on sale of land		(104,000)		(104,000)
Other		(28,000)		(4,700)
Total deferred tax liabilities	$	(2,386,200)	$	(2,070,100)

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 2010.