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Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

15. Income Taxes

Note 15 – Income Taxes

The Company files a consolidated U.S. federal income tax return that includes all wholly owned subsidiaries. State tax returns are filed on a consolidated or separate return basis depending on applicable laws. The Company records adjustments related to prior years’ taxes during the period when they are identified, generally when the tax returns are filed. The effect of these adjustments on the current and prior periods (during which the differences originated) is evaluated based upon quantitative and qualitative factors and are considered in relation to the consolidated financial statements taken as a whole for the respective periods.

The provision for income taxes is comprised of the following:

Years ended December 31,		2020				2019

Current federal income tax expense (benefit)		$	(5,366,759	)		$	174,779
Current state income tax expense (benefit)			(2,736	)			238
Deferred federal and state income tax expense (benefit)			3,109,295				(1,991,208	)

Income tax benefit		$	(2,260,200	)		$	(1,816,191	)

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:

Years ended December 31,		2020								2019
Computed expected tax (benefit) expense		$	(270,440	)			21.0	%		$	(1,634,334	)			21.0	%
State taxes, net of federal benefit			(233,752	)			18.2				(247,909	)			3.2
State valuation allowance			292,087				(22.7	)			261,573				(3.4	)
Benefit of higher tax brackets in NOL carryback - current year			(754,829	)			58.6				-				-
Benefit of higher tax brackets in NOL carryback - prior year			(1,274,465	)			99.0				-				-
Permanent differences
Dividends received deduction			(118,113	)			9.2				(97,631	)			1.3
Non-taxable investment income			(55,752	)			4.3				(39,901	)			0.5
Excess benefit from stock-based compensation			-				-				184				-
Stock-based compensation			125,923				(9.8	)			80,453				(1.0	)
Other permanent differences			46,108				(3.6	)			(15,961	)			0.2
Prior year tax matters			(77,625	)			6.0				(91,748	)			1.2
Other			60,658				(4.7	)			(30,917	)			0.3
Income tax benefit, as reported		$	(2,260,200	)			175.5	%		$	(1,816,191	)			23.3	%

(1) The deferred tax assets from net operating loss carryovers are as follows:

		December 31,				December 31,
Type of NOL		2020				2019				Expiration

Federal only, current year (A)			1,200,056				1,517,866
NOL carried back			(1,200,056	)			(1,517,866	)
Federal only, current year		$	-			$	-

State only (B)			1,815,546				1,616,568			December 31, 2040
Valuation allowance			(1,815,546	)			(1,548,187	)
State only, net of valuation allowance			-				68,381

Total deferred tax asset from net operating loss carryovers		$	-			$	68,381

The table below reconciles the changes in net deferred income tax assets (liabilities) to the deferred income tax provision for the year ended December 31, 2020:

Decrease in net deferred income tax assets		$	4,467,965
Deferred tax expense allocated to other comprehensive income			1,358,670
Deferred income tax expense		$	3,109,295