Note 7.

Income Taxes

Total income taxes were allocated as follows:

	2020		2019
Total tax expense (benefit) on income	$	3,334	$	(21	)

Tax expense on components of shareholders’ equity:
Net unrealized gains on investment securities		3,865		4,783
Total tax expense	$	7,199	$	4,762

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and the income tax benefit is as follows:

	2020			2019
Federal income tax provision	$	3,256		$	(86	)
Statutory rate		21	%		21	%
Dividends-received deduction		(12	)		(23	)
Meals & entertainment		20			55
Vested stock & club dues		36			37
Parking disallowance		16			17
Adjustment for prior years’ estimates to actual		18			(21	)
Income tax expense (benefit)	$	3,334		$	(21	)
Effective tax rate		21.5	%		5.2	%

The primary differences between the effective tax rate and the federal statutory income tax rate for 2020 resulted from permanent differences related to meals & entertainment and vested stock grants. Also contributing to differences between the effective tax rate and the federal statutory income tax rate were provision-to-filed return adjustments that are generally updated at the completion of the third quarter of each fiscal year and were $18 in the year ended December 31, 2020.

The primary differences between the effective tax rate and the federal statutory income tax rate for 2019 resulted from permanent differences related to meals & entertainment and vested stock grants. Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the dividends-received deduction (“DRD”). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income.

Deferred tax assets and liabilities at December 31, 2020 and 2019 were comprised of the following:

	2020			2019
Deferred tax assets:
Deferred acquisition costs	$	4,666		$	2,540
Insurance reserves		2,682			3,323
Impaired assets		822			822
Bad debts and other		326			319
Total deferred tax assets		8,496			7,004
Deferred tax liabilities:
Deferred and uncollected premiums	$	(409	)	$	(328	)
Net unrealized investment gains		(9,235	)		(6,090	)
Other		(153	)		(272	)
Total deferred tax liabilities		(9,797	)		(6,690	)
Net deferred tax (liability) asset	$	(1,301	)	$	314

The components of income tax expense (benefit) were:

	2020			2019
Current – Federal	$	5,584		$	892
Deferred – Federal		(2,250	)		(913	)
Total	$	3,334		$	(21	)

The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years 2017, 2018 and 2019 are considered open tax years that remain subject to examination by the Internal Revenue Service.