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Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

16. Income Taxes

The components of the Company’s income tax expense (benefit) are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	​
​	​	December 31,
​		2022			2021			2020
​	​	(in thousands)
Current	​	$	18,842	​	$	10,650	​	$	(1,128)
Deferred	​		(3,461)	​		641	​		1,094
Income tax expense (benefit)	​	$	15,381	​	$	11,291	​	$	(34)

​

As of December 31, 2022 and 2021, significant components of the Company’s deferred tax assets and liabilities were as follows:

​

​	​	​	​	​	​	​
​	​	December 31,
​		2022			2021
​	​	(in thousands)
Deferred tax assets:		​			​
Losses and LAE reserve discount	​	$	680	​	$	279
State tax net operating losses	​		3,070	​		2,879
Deferred Intercompany	​	​	656	​	​	—
Unearned premiums	​		11,258	​		9,569
Capitalized organizational costs	​		184	​		214
Unrealized losses on investments	​	​	9,891	​	​	—
Deferred compensation	​		1,585	​		997
Other	​		1,544	​		1,285
Total deferred tax assets	​	$	28,868	​	$	15,223
Deferred tax liabilities:	​			​
Deferred acquisition costs	​	$	(11,922)	​	$	(11,754)
Unrealized gains on investments	​		—	​		(1,612)
Internally developed software	​	​	(1,520)	​	​	(1,969)
Other	​		(1,734)	​		(919)
Total deferred tax liabilities	​		(15,176)	​		(16,254)
Net deferred tax asset (liability) before valuation allowance	​		13,692	​		(1,031)
Valuation allowance	​		(3,070)	​		(2,879)
Total net deferred tax assets (liabilities)	​	$	10,622	​	$	(3,910)

​

The valuation allowance shown above relates to deferred tax assets associated with state net operating loss carryforwards. These carryforwards do not meet the “more likely than not” criteria under ASC 740, Income Taxes due to the limited carryforward period and the Company will continue to maintain a valuation allowance on the associated deferred tax assets as of December 31, 2022. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present.

As of December 31, 2022, there are no federal net operating losses or tax credit carryforwards.

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the tax years ended December 31, 2022, 2021 and 2020:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​	​	2022				​	2021				​	2020
​	​	($ in thousands)
Expense computed at federal tax rate		$	14,186	​	21.00	%	$	11,999	​	21.00	%	$	1,321	​	21.00	%
Stock-based compensation	​		153	​	0.23	%		(1,067)	​	(1.87)	%		(1,538)	​	(24.44)	%
Dividend received deduction and tax‑exempt interest	​		(101)	​	(0.15)	%		(81)	​	(0.14)	%		(67)	​	(1.06)	%
Valuation allowance	​		191	​	0.28	%		2,199	​	3.85	%		606	​	9.63	%
Other	​		952	​	1.41	%		(1,759)	​	(3.08)	%		(356)	​	(5.67)	%
Income tax expense (benefit)	​	$	15,381		22.77	%	$	11,291		19.76	%	$	(34)		(0.54)	%

​

For the year ended December 31, 2022, the difference relates primarily to non-deductible executive compensation expense and state taxes. For the year ended December 31, 2021, the difference relates primarily to a benefit from the permanent component of employee stock option exercises and state taxes. For the year ended December 31, 2020, the difference relates primarily the permanent component of employee stock option exercises. For the years ended December 31, 2021 and Decembers 31, 2020, the Company increased its valuation allowance relating to deferred tax assets associated with state net operating losses.

As of December 31, 2022 and 2021, the Company had no uncertain tax positions that required either recognition or disclosure in the consolidated financial statements. This is not expected to change significantly during the next twelve months. The Company classifies interest and penalties, if any, related to the liability for unrecognized tax benefits as a component of the provision for income taxes. The Company’s income tax returns for 2019 through 2021 remain subject to examination by the tax authorities.

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- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
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-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
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