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Note 8: Income Taxes

12 Months Ended

Dec. 31, 2016

Notes

Note 8: Income Taxes

8) Income Taxes

The Company’s income tax liability (benefit) is summarized as follows:

	December 31
	2016 (As Restated)		2015 (As Restated)
Current	$ (1,511,762)		$ (215,366)
Deferred	25,830,631		20,628,255
Total	$ 24,318,869		$ 20,412,889

Significant components of the Company’s deferred tax (assets) and liabilities are approximately as follows:

	December 31
	2016 (As Restated)		2015 (As Restated)
Assets
Future policy benefits	$ (9,719,058)		$ (7,551,336)
Loan loss reserve	(288,590)		(1,163,700)
Unearned premium	(1,519,722)		(1,610,684)
Available for sale securities	(51,266)		(150,984)
Net operating loss	(1,531,160)		(588,537)
Deferred compensation	(2,225,208)		(1,994,927)
Deposit obligations	(1,033,580)		(1,026,984)
Other	(3,384,144)		(3,694,959)
Less: Valuation allowance	431,802		-
Total deferred tax assets	(19,320,926)		(17,782,111)

Liabilities
Deferred policy acquisition costs	18,150,517		14,838,604
Basis difference in property and equipment	10,749,036		9,375,146
Value of business acquired	2,573,902		2,972,883
Deferred gains	9,290,123		6,902,888
Trusts	1,599,657		1,599,657
Tax on unrealized appreciation	2,788,322		2,721,188
Total deferred tax liabilities	45,151,557		38,410,366
Net deferred tax liability	$ 25,830,631		$ 20,628,255

The valuation allowance relates to differences between recorded deferred tax assets and liabilities and ultimate anticipated realization. For the year ended December 31, 2016, the Company recorded a valuation allowance of $431,802 that relates to the acquisition of First Guaranty Insurance Company that was completed on July 11, 2016.

The Company paid $2,667,918, $2,716,161 and $408,939 in income taxes for the years ended December 31, 2016, 2015 and 2014, respectively.

The Company’s income tax expense (benefit) is summarized as follows for the years ended December 31:

		2016 (As Restated)		2015 (As Restated)		2014 (As Restated)
Current
Federal		$ 1,138,196		$ 2,423,846		$ 1,532,539
State		245,764		412,175		121,124
		1,383,960		2,836,021		1,653,663

Deferred
Federal		5,686,651		4,413,336		3,406,545
State		443,993		412,674		449,911
		6,130,644		4,826,010		3,856,456

Total		$ 7,514,604		$ 7,662,031		$ 5,510,119

The reconciliation of income tax expense at the U.S. federal statutory rates is as follows:

		2016 (As Restated)		2015 (As Restated)		2014 (As Restated)
Computed expense at statutory rate		$ 6,699,099		$ 7,144,580		$ 4,667,165
State tax expense, net of federal tax benefit		455,240		544,400		376,883
Change in valuation allowance		431,802		-		-
Other, net		(71,537)		(26,949)		466,071
Tax expense		$ 7,514,604		$ 7,662,031		$ 5,510,119

At December 31, 2016, the Company had no significant unrecognized tax benefits. As of December 31, 2016, the Company does not expect any material changes to the estimated amount of unrecognized tax benefits in the next twelve months. Federal and state income tax returns for 2013 through 2016 are subject to examination by taxing authorities.