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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Tax Disclosure | 14) INCOME TAXES The Company files a consolidated federal income tax return with all subsidiaries. The following table summarizes the provision for income taxes:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Federal: |  |  |  |  |
Current | $ | (171) |  |  | $ | (2,207) |  |  | $ | (27,310) |
Deferred | 18,823 |  |  | (18,830) |  |  | (6,611) |
Provision (benefit) for Federal income tax expense | 18,652 |  |  | (21,037) |  |  | (33,921) |
State: |  |  |  |  |
Current | 1,518 |  |  | 1,033 |  |  | 598 |
Deferred | 5,315 |  |  | (3,985) |  |  | (3,282) |
Provision (benefit) for State income tax expense | 6,833 |  |  | (2,952) |  |  | (2,684) |
Provision (benefit) for income taxes | $ | 25,485 |  |  | $ | (23,989) |  |  | $ | (36,605) |
The actual income tax expense differs from the expected income tax expense computed by applying the combined applicable effective federal and state tax rates to income before the provision for income taxes as follows:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Expected income tax expense at federal rate | $ | (93,341) |  |  | $ | (17,610) |  |  | $ | (27,741) |
State tax expense, net of federal deduction benefit | (13,899) |  |  | (1,176) |  |  | (3,603) |
Dividend received deduction | (73) |  |  | (59) |  |  | (141) |
Non-Deductible Goodwill | 2,848 |  |  | (2) |  |  | — |
Other permanent items | 241 |  |  | 127 |  |  | 600 |
Prior period accrual adjustment | 469 |  |  | (1,053) |  |  | 2,230 |
Outside basis in subsidiary | 189 |  |  | (964) |  |  | 470 |
Net operating loss carryback rate benefit (1) | — |  |  | — |  |  | (12,566) |
Municipal tax-exempt interest | (50) |  |  | (134) |  |  | (280) |
Change in valuation allowance | 128,993 |  |  | (1,352) |  |  | 5,505 |
Change in enacted tax rate | 110 |  |  | (1,386) |  |  | (358) |
Change in tax credit carryforward | — |  |  | (380) |  |  | (721) |
Other, net | (2) |  |  | — |  |  | — |
Reported income tax benefit | $ | 25,485 |  |  | $ | (23,989) |  |  | $ | (36,605) |
(1) Pursuant to the recently enacted CARES Act. Deferred income taxes, which are included in other assets or other liabilities as appropriate, 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. As of December 31, 2022, we had net operating loss (NOL) carryforwards. The amount and timing of realizing the benefits of NOL carryforwards depend on future taxable income and limitation imposed by tax laws. There is no expiration for $1,101,000 of our Federal NOL carryforward. The remaining $452,413,000 of our Federal NOL carryforward expires beginning in 2040 and fully expiring by the end of 2042. Our $404,279,000 of state NOL carryforward expires beginning in 2039 and fully expiring by the end of 2042. The unused business tax credits of $1,610,000 will expire beginning in 2037 and fully expiring by the end of 2040. The table below summarizes the significant components of our net deferred tax asset (liability):
| December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Unearned premiums | $ | 16,115 |  |  | $ | 10,326 |
Unrealized loss | 8,768 |  |  | 1,230 |
Tax-related discount on loss reserve | 5,505 |  |  | 3,121 |
R&D tax credit carryforward | 1,610 |  |  | 1,990 |
Other-than-temporary impairment | 5,500 |  |  | — |
Investments | 2,620 |  |  | 344 |
Bad debt expense | 1,077 |  |  | 144 |
Equity compensation | 474 |  |  | 405 |
Dual consolidated loss carryforward | 5,958 |  |  | 5,103 |
Net operating loss carryforward | 112,804 |  |  | 25,472 |
Other | 1,541 |  |  | 789 |
Total pre-allowance deferred tax assets | 161,972 |  |  | 48,924 |
Valuation allowance | (140,034) |  |  | (5,142) |
Total deferred tax assets | 21,938 |  |  | 43,782 |
Deferred tax liabilities: |  |  |
Deferred acquisitions costs | (14,743) |  |  | (10,356) |
Intangible assets | (2,823) |  |  | (3,607) |
Prepaid expenses | (744) |  |  | (837) |
Investments | (62) |  |  | (77) |
Fixed assets | (3,743) |  |  | (4,990) |
Total deferred tax liabilities | (22,115) |  |  | (19,867) |
Net deferred tax asset (liability) | $ | (177) |  |  | $ | 23,915 |
We had a valuation allowance of $140,034,000 and $5,142,000 at December 31, 2022 and 2021, respectively. In assessing the net realizable value of deferred tax assets, we consider whether it is more likely than not that we will not realize some portion or all of the deferred tax assets. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible. We considered taxable income (loss), reversals of temporary items, projected future taxable income and tax planning strategies in making this assessment. The current year increase in valuation allowance predominately relates to the impact of current year results on management’s estimate that the majority of its net deferred tax assets will not be realizable. The statute of limitations related to our consolidated Federal income tax returns and our Florida income tax returns expired for all tax years up to and including 2018; therefore, only the 2019 through 2022 tax years remain subject to examination by taxing authorities. During the year ended December 31, 2022, we were examined by the IRS regarding tax years 2018, 2019 and 2020. During the year ended December 31, 2020, we were examined by the Internal Revenue Service (IRS) regarding our 2016 income tax return. Tax years 2018, 2019 and 2020 are with Joint Committee review, however, no material adjustments have been proposed. UPC Insurance’s reinsurance subsidiaries, which are based in the Cayman Islands and Bermuda, made an irrevocable election under section 953(d) of the U.S. Internal Revenue Code of 1986, as amended, to be treated as a domestic insurance company for U.S. Federal income tax purposes. As a result of this election, our reinsurance subsidiaries are subject to United States income tax on its worldwide income as if it were a U.S. corporation. The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits for the year ended December 31, 2022:
|  | December 31, 2022
Balance at January 1 |  | $ | 834 |
Decrease based on tax positions related to prior years |  | (168) |
Balance at December 31 |  | $ | 666 |
Included in the balance at December 31, 2022 was $666,000 of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. We do not anticipate a material change in the unrecognized tax benefits over the next 12 months.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -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 -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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