INCOME TAXES

The components of income tax expense for the years ended December 31, 2017, 2016 and 2015, are as follows:



In thousands	2017		2016		2015
Federal:
Current	$	4,767	$	3,530	$	3,316
Deferred	1,413		171		392
	6,180		3,701		3,708
State:
Current	156		67		53
Deferred	298		—		—
	454		67		53
	$	6,634	$	3,768	$	3,761

Reconciliations of the statutory federal income tax to the income tax expense reported in the consolidated statements of income for the years ended December 31, 2017, 2016 and 2015, are as follows:



	Percentage of Income before Income Taxes
	2017		2016		2015
Federal income tax at statutory rate	35.0	%	34.0	%	34.0	%
State income taxes, net of federal benefit	1.8	%	0.3	%	0.2	%
Tax-exempt income	(5.0	)%	(4.8	)%	(4.4	)%
Earnings on investment in bank-owned life insurance	(2.3	)%	(2.6	)%	(2.5	)%
Rehabilitation and low-income housing credits	(1.7	)%	(2.0	)%	(2.0	)%
Reduction of federal tax rate	10.2	%	—	%	—	%
Other	2.4	%	0.8	%	0.2	%
	40.4	%	25.7	%	25.5	%

The provision for federal income taxes includes $0, $9,000 and $89,000 of income taxes related to net gains on sales of securities in 2017, 2016 and 2015, respectively. Rehabilitation and low-income housing income tax credits were $287,000, during 2017, 2016 and 2015, respectively. Projected credits are $287,000 in 2018 and 2019, and $876,000 thereafter.

Components of deferred tax assets and liabilities at December 31 were as follows:



In thousands	2017		2016
Deferred tax assets:
Allowance for loan losses	$	3,052	$	4,968
Available for sale securities	282		143
Accrued deferred compensation	852		1,166
Pension	1,789		3,101
Other-than-temporary impairment	43		70
Nonaccrual interest	171		226
Deferred director fees	520		686
Acquisition accounting	1,357		—
Other	521		982
	8,587		11,342
Deferred tax liabilities:
Deferred loan fees	114		79
Available for sale securities	—		—
Prepaid pension benefit cost	4,248		6,632
Prepaid expenses	132		123
Accumulated depreciation	426		372
Goodwill/intangibles	928		1,006
	5,848		8,212
Net Deferred Tax Asset included in Other Assets	$	2,739	$	3,130

The Corporation did not have any uncertain tax positions at December 31, 2017 and 2016. The Corporation’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income.

Years that remain open for potential review by the Internal Revenue Service are 2014 through 2017.

On December 22, 2017, the United States government enacted comprehensive tax legislation, known as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including a reduction in the base corporate tax rate from the prior existing statutory rate, which was 35% for ACNB, to 21%. Based on estimates and current accounting guidance, the Corporation estimated that the Tax Act resulted in a charge against 2017 net income of approximately $1.7 million, due to the write down of ACNB’s net deferred tax assets due to the Tax Act’s reduction in the base corporate tax rate to 21%. This estimate was based on a review and analysis of the Corporation’s net deferred tax assets at December 31, 2017, as well as adjustments to various deferred tax assets and deferred tax liabilities in the fourth quarter, including those accounted for in accumulated other comprehensive income.