Income Tax

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

INCOME TAXES

Our provision for income taxes may not have the customary relationship of taxes to income. CICA Ltd., a wholly owned subsidiary of Citizens, is considered a controlled foreign corporation for federal tax purposes. As a result, the insurance activity of CICA Ltd. is subject to Subpart F of the IRC and is included in Citizens’ taxable income. For the three months ended March 31, 2021, the Subpart F income inclusion generated $0.4 million of federal income tax expense. A reconciliation between the U.S. corporate income tax rate and the effective income tax rate is as follows:

Three Months Ended March 31,	2021				2020
(In thousands, except for %)	Amount		%		Amount	%
Federal income tax expense:
Expected tax expense (benefit)	$	(577)	21.0	%	(469)	21.0	%
Foreign income tax rate differential	(152)		5.5	%	(550)	24.6	%
Tax-exempt interest and dividends-received deduction	(30)		1.1	%	(40)	1.8	%
Annualized effective tax rate adjustment	655		(23.8)	%	617	(27.6)	%
Adjustment of prior year taxes	—		—	%	(5)	0.2	%
Effect of uncertain tax position	603		(21.9)	%	1,015	(45.4)	%
CICA Ltd. Subpart F income	392		(14.3)	%	675	(30.2)	%
Nondeductible officer compensation	(73)		2.7	%	—	—	%
Other	7		(0.3)	%	106	(4.7)	%
Total federal income tax expense (benefit)	$	825	(30.0)	%	1,349	(60.3)	%

Income tax expense consists of:

Three Months Ended March 31,	2021		2020
(In thousands)
Federal income tax expense:
Current	$	1,257	1,629
Deferred	(432)		(280)
Total federal income tax expense	$	825	1,349

The components of deferred federal income taxes are as follows:

Net Deferred Tax Asset (Liability) (In thousands)	March 31, 2021		December 31, 2020
Deferred tax assets:
Future policy benefit reserves	$	2,732	2,657
Net operating and capital loss carryforwards	1,774		1,395
Accrued policyholder dividends and expenses	134		124
Investments	198		147
Deferred intercompany loss	1,967		2,002
Fixed assets	481		420
Lease liability	2,446		2,514
Accrued compensation	376		513
Other	166		164
Total gross deferred tax assets	10,274		9,936
Deferred tax liabilities:
Deferred policy acquisition costs, cost of insurance acquired and intangible assets	(8,531)		(8,693)
Unrealized gains on investments available-for-sale	(5,430)		(4,522)
Tax reserves transition liability	(3,549)		(3,736)
Right-of-use lease asset	(2,446)		(2,514)
Other	(35)		(35)
Total gross deferred tax liabilities	(19,991)		(19,500)
Net deferred tax liability	$	(9,717)	(9,564)