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9) Income Taxes

12 Months Ended

Dec. 31, 2018

Notes

9) Income Taxes

9) Income Taxes

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

	December 31
	2018		2017
Current	$ 473,800		$ (922,754)
Deferred	15,649,198		18,255,537
Total	$ 16,122,998		$ 17,332,783

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

	December 31
	2018		2017
Assets
Future policy benefits	$ (8,293,592)		$ (6,803,339)
Loan loss reserve	(938,496)		(697,779)
Unearned premium	(823,299)		(886,706)
Available for sale securities	(366,279)		(237,677)
Net operating loss	(593,272)		(631,892)
Deferred compensation	(1,677,118)		(1,600,401)
Deposit obligations	(610,769)		(627,193)
Other	(185,557)		(276,127)
Total deferred tax assets	(13,488,382)		(11,761,114)

Liabilities
Deferred policy acquisition costs	15,255,960		13,700,093
Basis difference in property and equipment	4,309,162		6,110,374
Value of business acquired	1,210,690		1,383,639
Deferred gains	6,267,373		6,978,067
Trusts	1,064,387		1,066,438
Tax on unrealized appreciation	1,030,008		778,040
Total deferred tax liabilities	29,137,580		30,016,651
Net deferred tax liability	$ 15,649,198		$ 18,255,537

The Company paid $5,701,565 and $581,556 in income taxes for the years ended December 31, 2018 and 2017, respectively.

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

		2018		2017
Current
Federal		$ 6,933,145		$ 934,647
State		166,567		236,559
		7,099,712		1,171,206

Deferred
Federal		(1,838,947)		(7,811,030)
State		(766,454)		59,002
		(2,605,401)		(7,752,028)

Total		$ 4,494,311		$ (6,580,822)

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

		2018		2017
Computed expense at statutory rate		$ 5,497,882		$ 2,560,918
State tax expense, net of federal tax benefit		(473,911)		195,070
Change in valuation allowance		-		(431,802)
Change in tax law		-		(8,973,722)
Other, net		(529,660)		68,714
Income tax expense (benefit)		$ 4,494,311		$ (6,580,822)

The Company’s overall effective tax rate for the years ended December 31, 2018 and 2017 was 17.2% and (87.4%), respectively. The Company’s effective tax rate reflects the reduction of the U.S. federal statutory corporate income tax rate from 35% to 21% beginning January 1, 2018 and differs from the 21% statutory rate partly due to its provision for state income taxes. The effective tax rate for 2017 included a benefit that primarily related to a re-measurement of deferred tax assets and liabilities taking the Tax Act’s newly enacted tax rate into account.

At December 31, 2018, the Company had no significant unrecognized tax benefits. As of December 31, 2018, 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 2015 through 2018 are subject to examination by taxing authorities.

Net Operating Losses and Tax Credit Carryforwards:

Year of Expiration
2019	114,600
2020	114,601
2021	17,101
2022	-
2023	-
Thereafter up through 2037	2,012,371

	$ 2,258,673