Canterbury Park Holding Corp Income Taxes Disclosure

4.    INCOME TAXES

 

The following table summarizes income (loss) before income taxes for the years ended December 31, 2025 and 2024:

 

		2025				2024
United States		$	(814,431	)		$	3,036,727
Foreign			-				-

 

The Company's income tax expense (benefit) for the years ended December 31, 2025 and 2024 is as follows:

 

		2025				2024
U.S. Federal		$	(507,000	)		$	522,900
State			(403,000	)			674,000
Foreign			-				-
Current income tax expense (benefit)			(910,000	)			1,196,900
U.S. Federal			238,000				51,985
State			387,000				(325,000	)
Foreign			-				-
Deferred income tax expense (benefit)			625,000				(273,015	)
Total income tax expense (benefit)		$	(285,000	)		$	923,885

 

The following is a reconciliation from the Company's statutory rate to the effective rate for the year ended December 31, 2025 and 2024 after adoption of ASU 2023-09:

 

		2025				Percent
United States federal statutory income tax rate		$	(171,000	)			21.0	%
State income taxes, net of federal tax benefit of state tax			(13,000	)			1.6	%
Credit for tax on employee tips			(29,000	)			3.6	%
Nontaxable or nondeductible items
Stock based compensation not benefited			27,000				(3.3	%)
Nondeductible lobbying expenses			38,000				(4.7	%)
Other			9,000				(1.1	%)
Changes in unrecognized tax benefits
IRS interest refund			(146,000	)			17.9	%
Provision for income tax benefit		$	(285,000	)			35.0	%

 

The following is a reconciliation from the Company's statutory rate to the effective rate for the year ended December 31, 2024 prior to the adoption of ASU 2023-09:

 

		2024				Percent
Federal tax (benefit) expense at statutory rates		$	637,700				21.0	%
State and local income tax, net of federal (national) income tax effect			275,700				9.1	%
Nondeductible lobbying expense			32,000				1.1	%
Stock-based compensation expense			4,900				0.2	%
Other			(26,415	)			(0.9	%)
Provision for income tax expense		$	923,885				30.4	%

 

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, 2025 and 2024 are as follows:

 

		2025				2024
Deferred tax assets:
Accrued compensation		$	97,000			$	82,300
Player rewards program accrual			89,000				94,800
Stock-based compensation			210,700				160,200
Net operating losses			218,600				—
Credits			48,000				—
Other			155,400				1,700
Net deferred tax assets			818,700				339,000
Deferred tax liabilities:
Land, building and equipment			5,982,700				5,523,200
Investment in joint ventures			3,996,900				3,468,100
TIF accrued interest receivable			1,058,000				962,100
Prepaid expenses			252,100				231,600
Net deferred tax liabilities			11,289,700				10,185,000
Net long-term deferred tax liabilities		$	(10,471,000	)		$	(9,846,000	)

 

For the period ended December 31, 2025, the Company had a federal and state net operating loss carryforwards of $460,000 and $1,574,000, respectively. The federal net operating loss carryforward has an indefinite carryforward period. The state post-apportioned net operating loss carryforward will expire in 2040.

 

The Company is subject to U.S. and Minnesota taxation. The Company is no longer subject to U.S. federal or state by tax authorities for years before 2022 and 2021, respectively.

 

The following is a reconciliation of the Company's unrecognized tax benefits for the years ended December 31, 2025 and 2024:

 

		2025				2024
Unrecognized tax benefits — January 1		$	181,000			$	—
Additions based on tax positions related to the current year			—				630,000
Additions for tax positions of prior years			—				—
Reductions for tax positions of prior years			—				—
Reductions for tax positions of current years			(181,000	)			(449,000	)
Unrecognized tax benefits — December 31		$	—			$	181,000

 

The Company has not accrued interest expense and penalties related to the unrecognized tax benefits for the periods ended  December 31, 2025 and December 31, 2024, respectively.

 

The following table summarizes the Company's tax payments and refunds by jurisdiction for the year ended December 31, 2025: 

 

Income Tax Paid, Net of Refunds
Federal refund		$	1,488,608
State			—
Foreign			—
		$	1,488,608