NOTE 6 - INCOME TAXES

Income taxes recorded in our consolidated statements of income consists of the following:

	2016		2015
Taxes currently payable
Federal	$	2,582,782	$	2,085,226
State		685,800		619,588
Deferred Income Taxes		(1,235,442)		(975,525)
Total Income Tax Expense (Benefit)	$	2,033,140	$	1,729,289

We account for income taxes in accordance with GAAP. As required by GAAP, we recognize the financial statement benefit of tax positions only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2016		2015
Balance Beginning of Year	$	-	$	281,363
Net Increases
Prior Period Tax Positions		-		-
Net Decreases
Prior Period Tax Positions		-		(118,030)
Settlements		-		(163,333)
Balance at End of Year	$	-	$	-

As of December 31, 2016 we had no unrecognized tax benefits. A petition related to HCC’s 2006 Minnesota tax return was previously filed in Minnesota Tax Court. This matter was resolved in April 2015.

We are primarily subject to United States, Minnesota, Nebraska and Iowa income taxes. Tax years subsequent to 2012 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of December 31, 2016 and 2015, we had no interest or penalty accrued.

The differences between the statutory federal tax rate and the effective tax rate were as follows:

	2016		2015

Statutory Tax Rate	35.00	%	35.00	%
Effect of:
Surtax Exemption	(1.00)		(1.00)
State Income Taxes Net of Federal Tax Benefit	7.60		7.14
Uncertain Tax Positions	-		(1.58)
Permanent Differences and Other, Net	-		(0.22)
Effective tax rate	41.60	%	39.34	%

Deferred income taxes and unrecognized tax benefits reflected in our consolidated balance sheets are summarized as follows:

	2016		2015
Deferred Tax (Assets) / Liabilities
Accrued Expenses	$	(636,600)	$	(634,958)
Other		(93,639)		(206,351)
Fixed Assets		10,143,817		10,489,965
Intangible Assets		6,335,077		7,316,252
Deferred Compensation		(306,810)		(312,381)
Partnership Basis		872,586		897,345
Total Deferred Tax Liability	$	16,314,431	$	17,549,872

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which amends the guidance requiring companies to simplify the classification of deferred income tax liabilities and assets into current and non-current amounts in a classified statement of financial position. The accounting guidance simplifies the presentation of deferred income taxes by classifying deferred tax liabilities and assets as non-current in a classified statement of financial position. This accounting guidance is effective for the Company beginning in the first quarter of 2017, but the Company has elected to adopt this guidance retrospectively as of December 31, 2016. As a result the Company has classified all deferred tax liabilities and assets as non-current in the consolidated Balance Sheet at December 31, 2016.