Income Taxes

6 Months Ended

Jun. 30, 2019

11. INCOME TAXES

Income Tax Expense



Income Tax Rate Reconciliation
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Tax provision at U.S. federal statutory rate	$	95		$	112		$	258		$	221
Tax-exempt interest	(14		)	(17		)	(29		)	(34		)
Executive compensation	1			3			5			7
Stock-based compensation	(1		)	—			(4		)	(2		)
Tax Reform	—			5			—			2
Other	3			—			(1		)	—
Provision for income taxes	$	84		$	103		$	229		$	194

In addition to the effect of tax-exempt interest, the Company's effective tax rate for the three and six months ended June 30, 2019 reflects a federal income tax expense of $1 and $5, respectively, related to non-deductible executive compensation and a benefit of $1 and $4, respectively, related to a deduction for stock-based compensation that vested at a fair value per share greater than the fair value on the date of grant.

Uncertain Tax Positions



Rollforward of Unrecognized Tax Benefits
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Balance, beginning of period	$	14	$	9	$	14	$	9
Gross increases - tax positions in prior period	—		—		—		—
Gross decreases - tax positions in prior period	—		—		—		—
Balance, end of period	$	14	$	9	$	14	$	9

The entire amount of unrecognized tax benefits, if recognized, would affect the effective tax rate in the period of the release.

Other Tax Matters

As of June 30, 2019 the Company had alternative minimum tax (AMT) credit carryovers of $835 which are reflected as a current income tax receivable within other assets in the accompanying Condensed Consolidated Balance Sheets. AMT credits may be used to offset a regular tax liability for any taxable year beginning after December 31, 2017, and are refundable at an amount equal to 50 percent of the excess of the minimum tax credit for the taxable year over the amount of credit allowable for the year against regular tax liability. Any remaining credits not used against regular tax liability are refundable in the 2021 tax year to be realized in 2022. For the three and six months ended June 30, 2019, the Company offset $4 and $6 of regular tax liability with AMT credits.

The Company had net operating loss (NOL) carryforwards in the United States and the United Kingdom for which future tax benefits of $352 and $2 have been recognized and are included in the Condensed Consolidated Balance Sheet as a component of the net deferred tax asset. The Company also has NOLs in other foreign jurisdictions for which a full valuation allowance has been established. Although the Company projects there will be sufficient future taxable income to fully recover the remainder of the NOL carryover for which benefits have been recognized, the Company's estimate of the likely realization may change over time. The U.S. NOL carryovers, if unused, would expire between 2026 and 2036. The foreign NOLs do not expire.

The federal audits for the Company have been completed through 2013, and the Company is not currently under federal examination for any open years. Navigators Group is currently under federal audit for the 2016 year and has completed examinations through 2015. Management believes that adequate provision has been made in the Company's Condensed Consolidated Financial Statements for any potential adjustments that may result from tax examinations and other tax-related matters for all open tax years.

The Company classifies interest and penalties (if applicable) as income tax expense in the condensed consolidated financial statements. The Company recognized no interest expense for the three and six months ended June 30, 2019 and 2018. The Company had no interest payable as of June 30, 2019 and 2018. The Company does not believe it would be subject to any penalties in any open tax years and, therefore, has not recorded any accrual for penalties.