NOTE 10 — Income Taxes

The Company files income taxes in the following jurisdictions: United States, Czech Republic and Germany. In the Czech Republic, prior to January 1, 2012, gaming income was not subject to corporate income tax. In lieu of income taxes, gaming income was subject to other taxes in the Czech Republic, including gaming and charity taxes, which were primarily based on percentages of gaming revenues. Foreign net operating loss carry-forwards (disclosed below) were derived from non-gaming activities and could only be applied against non-gaming activities. Effective January 1, 2012, the Czech government instituted an effective corporate income tax of 19.0%, on income. For the year ended December 31, 2015, the Company recorded an income tax provision of $1,394, which includes a $266 deferred income tax benefit resulting from foreign book tax differences on fixed assets and other temporary items. For the year ended December 31, 2014, the Company recorded an income tax provision of $1,308, which included a $161 deferred income tax benefit resulting from foreign book tax differences on fixed assets and other temporary items. Corporate income tax is payable by the end of June of the subsequent year. In compliance with new tax regulations, the Company began making quarterly, estimated corporate income tax payments beginning for the quarter ended September 30, 2013.

Domestic and foreign income taxes, included in the consolidated statements of operations, for the years ended December 31, 2015 and 2014 are summarized below:

	2015			2014
Income (loss) before taxes:
U.S.	$	(957	)	$	(703	)
Foreign	6,209			4,649

Total income before taxes	$	5,252		$	3,946

The Company’s provision (benefit) for income taxes at December 31, 2015 and 2014 is summarized as follows:

	2015			2014

Current	$	1,660		$	1,469
Deferred	(266		)	(161		)

Provision for income taxes	1,394			1,308

Effective income tax rate	26.5		%	$	33.1	%

The Company’s effective income tax rate differs from the statutory federal income tax rate as follows:

	2015		2014
U.S. Federal income tax statutory rate	1,786		1,342
Foreign income tax rate differential	(966	)	(697	)
Permanent items	408		(300	)
Other	(137	)	430
Change in valuation allowance	303		533


Total provision for income taxes	1,394		1,308

The Company’s current year effective income tax rate was impacted due to losses in the United States for which no benefit has been recorded. A majority of the earnings recognized by the Company during the year ended December 31, 2015 were at our properties in the Czech Republic. Based on permanent items and the impact of foreign currency exchange rates, the earnings in the Company’s Czech properties accounted for nearly 100% of the total tax expense recorded.

The Company records deferred tax assets and liabilities based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted statutory tax rate in effect for the year these differences are expected to reverse. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. The recorded deferred tax assets are reviewed for impairment on a quarterly basis by reviewing the Company’s internal estimates for future taxable income.

The Company assesses the continuing need for a valuation allowance that results from uncertainty regarding its ability to realize the benefits of the Company’s deferred tax assets. The Company has a valuation allowance of $16,130 on its U.S. deferred tax assets as of December 31, 2015 due to the uncertainty of future taxable income. The ultimate realization of deferred income tax assets depends on generation of future taxable income in the jurisdictions where the assets are located during the periods in which those temporary differences become deductible. If the Company concludes that its prospects for the realization of its deferred tax assets are more likely than not, the Company will then reduce its valuation allowance as appropriate and credit income tax.

At December 31, 2015, the Company had U.S., state and foreign net operating loss carry forwards (“NOL’s”) of approximately $38,825, $44,790 and $98, respectively, available to offset certain future taxes payable. However, certain historical events may have triggered significant limitations on pre-existing U.S. NOL’s pursuant to Section 382 of the Internal Revenue Code. A full valuation allowance has been established for these deferred tax assets since their realization is considered uncertain. The Company’s NOLs will begin to expire in 2017.

The Company’s deferred income taxes at December 31, 2015 and 2014 are summarized as follows:

	2015			2014
Deferred tax assets :
Accrued liabilities	556			343
NOL carry forward	15,725			17,381
Other	27			444

Total deferred tax assets	16,308			18,168
Valuation allowance	(16,130		)	(18,116		)

Net deferred tax assets	178			52

Deferred tax (liabilities):
Property and equipment	(210		)	(350		)

Total deferred tax (liabilities)	(210		)	(350		)

Net deferred tax (liabilities)	$	(32	)	$	(298	)

In November 2015, the FASB issued guidance on balance sheet classification of deferred taxes, requiring that all tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The guidance is effective for annual reporting periods beginning after December 15, 2016. The Company has early adopted this guidance. This did not result in a change to the Company’s classification of deferred tax assets and liabilities.

The Company has analyzed filing positions in all of the U.S. federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its U.S. federal tax return, its state tax return in New York and its foreign tax returns in Czech Republic and Germany, where it owns and operated casinos and hotels, as “major” tax jurisdictions, as defined by the Code.

The Company’s tax returns for the following periods are subject to examination:

Jurisdiction:		Periods
U.S. Federal		2012 – 2014
U.S. State — New York		2012 – 2014
Czech Republic		2008 – 2014
Germany		2014

The Company has not recognized any tax liability for uncertain income tax positions on any of its returns. The Company may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results.

Based on the Company’s capital, debt and liquidity position, there is no expected need for cash repatriation from foreign subsidiaries, and all cash held in foreign jurisdictions is considered permanently reinvested. These earnings could become subject to income taxes if they are remitted as dividends, are loaned to the Company or any of the Company’s subsidiaries located in the United States, or if the Company sells its stock in the foreign subsidiaries.

It is the policy of the Company to reinvest the undistributed earnings of its foreign subsidiaries in those operations and to continue to seek out acquisition opportunities. As of December 31, 2015, the Company has not made a provision for U.S. or additional foreign withholding taxes of the unremitted earnings.