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Income Taxes
12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
We are a U.S. taxpayer and are subject to a statutory U.S. federal corporate income tax rate of 21%. NMIH files a consolidated U.S. federal and various state income tax returns on behalf of itself and its subsidiaries.
Total income tax expense consists of the following components:
For the years ended December 31,
202220212020
(In Thousands)
Current$10 $85 $34 
Deferred84,393 65,510 46,506 
Total income tax expense $84,403 $65,595 $46,540 
For the years ended December 31, 2022, 2021 and 2020, we had income tax expenses of $84.4 million, $65.6 million, and $46.5 million, respectively, including amounts related to current state income taxes and changes to our federal and state net deferred tax liability.
The following table presents a reconciliation between the federal statutory income tax rate and our effective income tax rate:
For the years ended December 31,
202220212020
 Federal statutory income tax rate 21.0 %21.0 %21.0 %
 State provision0.6 0.5 0.5 
 Share-based and other compensation0.5 0.6 0.1 
 Warrant gain(0.1)— (0.3)
 Other0.4 — — 
 Effective income tax rate 22.4 %22.1 %21.3 %
The components of our net deferred tax liability are summarized as follows:
As of December 31,
20222021
Deferred tax asset:(In Thousands)
Unrealized loss on investments$53,205 $— 
Net operating loss carry forwards8,898 8,759 
Share-based compensation6,320 6,090 
Unearned premium reserve5,264 5,878 
Accrued expenses1,430 2,852 
Other 957 1,067 
Total gross deferred tax asset76,074 24,646 
Less: valuation allowance(8,888)(8,582)
Total deferred tax asset67,186 16,064 
Deferred tax liability:
Contingency reserve(242,192)(157,919)
Deferred acquisition costs(12,653)(12,797)
Capitalized software(4,737)(7,286)
Unrealized gain on investments— (1,503)
Other (1,463)(734)
Total deferred tax liability(261,045)(180,239)
Net deferred income tax (liability) $(193,859)$(164,175)
As a mortgage guaranty insurance company, we are eligible to claim a tax deduction for our statutory contingency reserve balance, subject to certain limitations outlined under IRC Section 832(e), to the extent we acquire tax and loss bonds in an amount equal to the tax benefit derived from the claimed deduction, which is our intent.
During the years ended December 31, 2022, 2021 and 2020, we purchased $65.2 million, $42.9 million and $38.8 million, of tax and loss bonds, respectively. As a result, we had no current federal income tax provision for the years ended December 31, 2022, 2021 and 2020. As of December 31, 2022 and 2021, we held $154.4 million and $89.2 million of tax and loss bonds, respectively, in "Prepaid federal income taxes" on our consolidated balance sheets.

At December 31, 2022, we had a federal net operating loss carryforward of $1.5 million which expires in varying amounts in 2030 and 2031, and state net operating loss carryforward of $133.2 million which expire in varying amounts from 2031 to 2043. Section 382 of the IRC imposes annual limitations on a corporation's ability to utilize its net operating loss carryforwards if it experiences an "ownership change." As a result of the acquisition of our insurance subsidiaries in 2012, $7.3 million of federal net operating losses were subject to annual limitations of $0.8 million through 2016, $0.5 million in 2017 and $0.3 million, thereafter, through 2028. Our federal net operating loss carryforward arises from this limitation and the constraint on our ability to utilize the net operating loss carryforward in full during the current period.

At December 31, 2022 and 2021, we recorded valuation allowances of $8.9 million and $8.6 million, respectively, against state net deferred tax assets that may not be realized in future periods. The valuation allowances for both years primarily relate to state net operating losses generated by NMIH, as NMIH operates at a loss and currently only generates revenue from its investment portfolio.

As of December 31, 2022 and 2021, we had zero reserves for unrecognized tax benefits as we have taken no material uncertain tax positions that would have required a reserve to be measured and recognized.

We file income tax returns with the U.S. federal government and various state jurisdictions that are subject to potential examination by tax authorities. We are not currently under examination by federal or state jurisdictions. Our U.S. federal income tax returns for 2019 and subsequent years, and state income tax returns for 2018 and subsequent years, remain open by statute.