17. INCOME TAXES

The Tax Cuts and Jobs Act, enacted on December 22, 2017 lowered the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The expense for income taxes is summarized below and includes both federal and applicable state corporate income taxes:


	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
Current	$	1,393	$	(988)	$	1,084
Deferred		179		2,665		1,679
Change in corporate tax rate		—		—		2,624
Income tax expense	$	1,572	$	1,677	$	5,387

The reconciliation between the federal statutory tax rate and the Company’s effective consolidated income tax rate is as follows:


	YEAR ENDED DECEMBER 31,
	2019				2018				2017
	AMOUNT		RATE		AMOUNT		RATE		AMOUNT		RATE
	(IN THOUSANDS, EXCEPT PERCENTAGES)
Income tax expense based on federal statutory rate	$	1,596	21.0	%	$	1,983	21.0	%	$	2,951	34.0	%
Tax exempt income		(131)	(1.4)			(131)	(1.4)			(283)	(3.3)
Other		107	1.1			(175)	(1.8)			95	1.0
Change in corporate tax rate		—	—			—	—			2,624	30.4
Total expense for income taxes	$	1,572	20.7	%	$	1,677	17.8	%	$	5,387	62.1	%

The following table highlights the major components comprising the deferred tax assets and liabilities for each of the periods presented:


	AT DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
DEFERRED TAX ASSETS:
Allowance for loan losses	$	1,949	$	1,821
Unfunded commitment reserve		215		187
Unrealized investment security losses		—		374
Premises and equipment		1,129		1,056
Accrued pension obligation		1,093		144
Other		230		255
Total tax assets		4,616		3,837
DEFERRED TAX LIABILITIES:
Investment accretion		(82)		(90)
Unrealized investment security gains		(456)		—
Other		(102)		(110)
Total tax liabilities		(640)		(200)
Net deferred tax asset	$	3,976	$	3,637

At December 31, 2019 and 2018, the Company had no valuation allowance established against its deferred tax assets as we believe the Company will generate sufficient future taxable income to fully utilize these assets.

As a result of the Tax Cuts and Jobs Act, the Company’s AMT tax credits that are not used to reduce regular taxes are eligible for a 50% refund in 2018 to 2020 and a 100% refund in 2021. Due to this change, the AMT tax credit has been fully utilized as of December 31, 2019. As of December 31, 2018, the AMT tax credit was reclassified to other assets and amounted to approximately $287,000.

The change in net deferred tax assets and liabilities consist of the following:


	YEAR ENDED
	DECEMBER 31,
	2019		2018
	(IN THOUSANDS)
Unrealized (gains) losses recognized in comprehensive income	$	(830)	$	288
Pension obligation of the defined benefit plan not yet recognized in income		1,348		51
Deferred provision for income taxes		(179)		(2,665)
Net increase (decrease)	$	339	$	(2,326)

The Company utilizes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The Company has no tax liability for uncertain tax positions. The Company’s federal and state income tax returns for taxable years through 2016 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.