Note 8: Income Taxes

12 Months Ended

Dec. 31, 2013

Notes

Note 8: Income Taxes

8)   Income Taxes

The Company’s income tax liability (benefit) at December 31 is summarized as follows:

	December 31
	2013	2012
Current	$ (1,578,071)	$     613,328
Deferred	17,529,919	17,309,970
Total	$ 15,951,848	$ 17,923,298

Significant components of the Company’s deferred tax (assets) and liabilities at December 31 are approximately as follows:

	December 31
	2013	2012
Assets
Future policy benefits	$ (5,381,385)	$ (4,160,489)
Loan loss reserve	(2,147,547)	(2,353,765)
Unearned premium	(1,759,087)	(1,830,492)
Available for sale securities	(566,316)	(599,528)
Net operating loss	(873,412)	(1,099,500)
Deferred compensation	(1,057,551)	(1,238,270)
Deposit obligations	(1,043,964)	(1,060,205)
Other	(1,287,773)	(1,090,409)
Less: Valuation allowance	5,593,063	6,328,931
Total deferred tax assets	(8,523,972)	(7,103,727)
Liabilities
Deferred policy acquisition costs	10,914,618	9,945,683
Basis difference in property and equipment	6,242,266	5,739,272
Value of business acquired	2,951,487	3,341,888
Deferred gains	3,545,692	2,790,709
Trusts	1,599,657	1,599,657
Tax on unrealized appreciation	800,171	996,488
Total deferred tax liabilities	26,053,891	24,413,697
Net deferred tax liability	$ 17,529,919	$ 17,309,970

The valuation allowance relates to differences between recorded deferred tax assets and liabilities and ultimate anticipated realization. The valuation allowance decreased $735,868 during 2013 and increased $2,688,604 during 2012.

The Company paid $4,009,598, $1,900,000, and $174,811 in income taxes for 2013, 2012 and 2011, respectively.

The Company’s income tax expense (benefit) is summarized as follows for the years ended December 31:

	2013	2012	2011
Current	$    1,821,539	$    2,707,962	$      130,526
Deferred	416,267	1,930,813	(192,731)
Total	$    2,237,806	$    4,638,775	$       (62,205)

The reconciliation of income tax expense at the U.S. federal statutory rates is as follows:

	2013	2012	2011
Computed expense at statutory rate	$    3,340,067	$    7,472,953	$      410,225
Special deductions allowed
small life insurance companies	-	-	(503,672)
Tax audit settlements	20,371	-	-
Other, net	(1,122,632)	(2,834,178)	31,242
Tax expense (benefit)	$    2,237,806	$    4,638,775	$       (62,205)

At December 31, 2013, the Company had no significant unrecognized tax benefits. As of December 31, 2013, the Company does not expect any material changes to the estimated amount of unrecognized tax benefits in the next twelve months. Federal and state income tax returns for 2009 through 2013 are subject to examination by taxing authorities. An examination of the Company’s 2009 through 2011 federal income tax returns was concluded September 10, 2013 without material adjustment. As part of the examination, the statute of limitations for 2009 was extended to September 15, 2014.