INCOME TAXES

The components of income tax expense for the years ended December 31, 2018 and 2017, are as follows:



In thousands	2018		2017
Federal:
Current	$	4,036	$	4,767
Deferred	388		1,413
	4,424		6,180
State:
Current	479		156
Deferred	69		298
	548		454
	$	4,972	$	6,634

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, 2018 and 2017, are as follows:



	Percentage of Income before Income Taxes
	2018		2017
Federal income tax at statutory rate	21.0	%	35.0	%
State income taxes, net of federal benefit	1.6	%	1.8	%
Tax-exempt income	(1.7	)%	(5.0	)%
Earnings on investment in bank-owned life insurance	(0.9	)%	(2.3	)%
Rehabilitation and low-income housing credits	(1.1	)%	(1.7	)%
Reduction of federal tax rate	—	%	10.2	%
Other	(0.3	)%	2.4	%
	18.6	%	40.4	%

The provision for federal income taxes includes $46,000 and $0 of income taxes related to net gains on sales of securities in 2018 and 2017, respectively. Rehabilitation and low-income housing income tax credits were $287,000, during 2018 and 2017, respectively. Projected credits are $287,000 in 2019 and 2020, and $589,000 thereafter.

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



In thousands	2018		2017
Deferred tax assets:
Allowance for loan losses	$	3,054	$	3,052
Available for sale securities	409		282
Accrued deferred compensation	884		852
Pension	2,207		1,789
Other-than-temporary impairment	43		43
Nonaccrual interest	192		171
Deferred director fees	589		520
Acquisition accounting	785		1,357
Other	602		521
	8,765		8,587
Deferred tax liabilities:
Deferred loan fees	101		114
Available for sale securities	—		—
Prepaid pension benefit cost	4,289		4,248
Prepaid expenses	130		132
Accumulated depreciation	347		426
Goodwill/intangibles	1,056		928
	5,923		5,848
Net Deferred Tax Asset included in Other Assets	$	2,842	$	2,739

The Corporation did not have any uncertain tax positions at December 31, 2018 and 2017. 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 2015 through 2018.

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.