Quarterly report pursuant to Section 13 or 15(d)

INCOME TAXES

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INCOME TAXES
9 Months Ended
Sep. 30, 2013
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 9 INCOME TAXES

The Company utilizes the asset and liability approach to measuring deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

In 2013, the State of North Dakota lowered its corporate income tax rate. The impact of this rate change was to lower the Company's deferred state income tax expense by approximately $0.5 million in the nine month period ended September 30, 2013.

The income tax provision for the three and nine months ended September 30, 2013 and 2012 consists of the following:

 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2013
   
2012
   
2013
   
2012
 
Current Income Taxes
 
$
-
   
$
3,422
   
$
4,614
   
$
8,772
 
Deferred Income Taxes
                               
Federal
   
956,000
     
175,000
     
19,925,000
     
30,660,000
 
State
   
72,000
     
35,000
     
1,333,000
     
4,210,000
 
Total Provision
 
$
1,028,000
   
$
213,422
   
$
21,262,614
   
$
34,878,772
 

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company's tax returns that do not meet these recognition and measurement standards.

The Company has no liabilities for unrecognized tax benefits.

The Company's policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. For the three and nine months ended September 30, 2013 and 2012, the Company did not recognize any interest or penalties in its statements of comprehensive income nor did it have any interest or penalties accrued in its balance sheet at September 30, 2013 and December 31, 2012 relating to unrecognized benefits.

The tax years 2012, 2011 and 2010 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which the Company is subject.