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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

15.Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted, implementing numerous changes to tax law including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, and the creation of certain refundable employee retention credits. There has been no impact to the Company’s income taxes due to this legislation.

The components of our provision for income tax expense (benefit) were as follows:

Year Ended December 31,

2021

2020

2019

Current tax provision

Federal

$

3,930

$

10,109

$

5,116

State

354

725

324

Total current

4,284

10,834

5,440

Deferred tax (benefit) provision

(1,310

)

638

1,871

Total provision for income taxes

$

2,974

$

11,472

$

7,311

The provision for income taxes differs from the amount that would be computed by applying the statutory federal rate to income before provision for income taxes as a result of the following:

Year Ended December 31,

2021

2020

2019

Income before income taxes

$

11,306

$

52,816

$

33,811

 

Expected provision for federal income taxes at 21%

$

2,374

$

11,091

$

7,100

 

State income taxes, net of federal impact

474

570

224

Tax-exempt interest

(197

)

(209

)

(235

)

Dividends received deduction

(122

)

(104

)

(89

)

Compensation-related expenses

326

130

151

Change in valuation allowance

77

(17

)

7

Other

42

11

153

Total provision for income taxes

$

2,974

$

11,472

$

7,311

 

We re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs and record an offset for the net amount of the change as a component of income tax expense from continuing operations in the period of enactment. We record any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards as a component of income tax expense from continuing operations. The valuation allowance against certain deferred income tax assets was $1,008, $931, and $594 at December 31, 2021, 2020, and 2019, respectively.

89

The income tax effects of temporary differences that give rise to significant portions of our deferred income tax assets and deferred income tax liabilities at December 31, 2021 and 2020 were as follows:

December 31,

2021

2020

Deferred income tax assets:

Unearned premium

$

5,783

$

5,013

Unpaid losses and LAE

1,096

792

Net operating loss carryovers

1,224

1,260

Other

1,967

1,538

Total deferred income tax assets

10,070

8,603

 

Deferred income tax liabilities:

Deferred policy acquisition costs

5,670

5,033

Net unrealized gains on investments

7,382

9,897

Intangibles

1,464

1,451

Other

52

48

Total deferred income tax liabilities

14,568

16,429

 

Net deferred income tax liability

(4,498

)

(7,826

)

 

Valuation allowance

(1,008

)

(931

)

Deferred income tax liability, net

$

(5,506

)

$

(8,757

)

At December 31, 2021 and 2020, we had no unrecognized tax benefits, no accrued interest and penalties, and no significant uncertain tax positions. No interest and penalties were recognized during the years ended December 31, 2021, 2020, or 2019.

At December 31, 2021 and 2020, the Company, other than Battle Creek and Westminster, had no income tax related carryovers for net operating losses, alternative minimum tax credits, or capital losses.

Battle Creek, which files its federal income tax returns on a stand-alone basis, had net operating loss carryovers of $3,215 and $3,390 at December 31, 2021 and 2020, respectively. The net operating loss carryforward began expiring in 2021 and will continue through 2032 due to limitations on the use of this net operating loss carryforward.

Westminster, which became part of the Company’s consolidated federal income tax return beginning in 2020, had $2,122 and $2,340 of net operating loss carryover at December 31, 2021 and 2020, respectively. This net operating loss carryforward expires in 2023 due to limitations on the use of this net operating loss carryforward.