Income Taxes

The components of income tax expense for the years ended December 31 are summarized as follows:



For the Years Ended December 31,	2014			2013			2012
Current:
Federal	$	3,121,000		$	4,873,000		$	5,018,000
State	84,000			69,000			163,000
Total current	3,205,000			4,942,000			5,181,000
Deferred:
Federal	620,156			1,805,215			(305,525		)
State	(9,156		)	(1,215		)	13,525
Total deferred	611,000			1,804,000			(292,000		)
Total	$	3,816,000		$	6,746,000		$	4,889,000

For state income tax purposes, ITIC and NITIC generally pay only a gross premium tax found in premium and retaliatory taxes in the Consolidated Statements of Income.

At December 31, the approximate tax effect of each component of deferred income tax assets and liabilities is summarized as follows:



For the Years Ended December 31,	2014			2013
Deferred income tax assets:
Accrued benefits and retirement services	$	3,061,144		$	3,074,164
Allowance for doubtful accounts	1,033,624			883,426
Other-than-temporary impairment of assets	323,089			319,962
Excess of book over tax depreciation	90,409			171,504
Postretirement benefit obligation	40,183			24,914
Reinsurance and commission payable	15,668			21,953
Net operating loss carryforward	25,000			5,000
Other	305,119			256,309
Total	4,894,236			4,757,232
Deferred income tax liabilities:
Net unrealized gain on investments	6,781,994			5,976,215
Recorded reserves for claims, net of statutory premium reserves	2,871,114			2,467,798
Other	656,621			327,202
Total	10,309,729			8,771,215
Net deferred income tax liabilities	$	(5,415,493	)	$	(4,013,983	)

At December 31, 2014 and 2013, no valuation allowance was recorded. Based upon the Company’s historical results of operations, the existing financial condition of the Company and management’s assessment of all other available information, management believes that it is more likely than not that the benefit of these deferred income tax assets will be realized.

A reconciliation of income tax as computed for the years ended December 31 at the U.S. federal statutory income tax rate of 34.3% for 2014, 34.1% for 2013 and 34.0% for 2012, respectively, to income tax expense follows:



For the Years Ended December 31,	2014			2013			2012
Anticipated income tax expense	$	4,626,555		$	7,346,074		$	5,467,168
Increase (decrease) related to:
State income taxes, net of federal income tax benefit	55,188			45,471			107,580
Tax-exempt interest income (net of amortization)	(876,365		)	(772,545		)	(757,005		)
Other, net	10,622			127,000			71,257
Provision for income taxes	$	3,816,000		$	6,746,000		$	4,889,000

In accounting for uncertainty in income taxes, the Company is required to recognize in its financial statements the impact of a tax position if that position is more likely than not of being sustained on an audit, based on the technical merits of the position. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. There were no unrecognized tax benefits or liabilities as of December 31, 2014.

The amount of unrecognized tax benefit or liability may increase or decrease in the future for various reasons, including adding amounts for current tax year positions, expiration of open income tax returns due to the expiration of the applicable statute of limitations, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the additions or eliminations of uncertain tax positions.

The Company’s policy is to report interest and penalties related to income taxes in the other line item in the Consolidated Statements of Income.

The Company, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various states. With few exceptions, the Company is no longer subject to U.S. federal or state and local examinations by taxing authorities for years before 2011.