Income Taxes

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



For the Years Ended December 31,	2017			2016		2015
Current:
Federal	$	9,163,000		$	5,745,000	$	4,179,000
State	71,000			81,000		34,000
Total current	9,234,000			5,826,000		4,213,000
Deferred:
Federal	(4,649,054		)	2,755,777		976,624
State	(14,946		)	34,223		38,376
Total deferred	(4,664,000		)	2,790,000		1,015,000
Total	$	4,570,000		$	8,616,000	$	5,228,000

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.

On December 22, 2017, the TCJA, was enacted into law. The new tax legislation, among other changes, reduces the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. As required under generally accepted accounting principles, the Company’s deferred tax assets and liabilities were revalued at the newly enacted U.S. corporate income tax rate. The impact was recognized in the Company’s provision for income taxes in the fourth quarter of 2017. The revaluation resulted in a benefit of approximately $5.3 million, or $2.82 per diluted share.

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,	2017			2016
Deferred income tax assets:
Accrued benefits and retirement services	$	2,448,598		$	3,625,943
Other-than-temporary impairment of assets	265,178			429,167
Allowance for doubtful accounts	102,015			122,477
Net operating loss carryforward	33,000			15,000
Postretirement benefit obligation	18,318			56,259
Other	878,195			418,335
Total	3,745,304			4,667,181
Deferred income tax liabilities:
Net unrealized gain on investments	5,193,029			6,207,324
Recorded reserve for claims, net of statutory premium reserves	4,126,388			4,985,984
Intangible assets	1,337,909			2,525,511
Excess of tax over book depreciation	1,042,205			1,303,710
Other	671,532			762,908
Total	12,371,063			15,785,437
Net deferred income tax liabilities	$	(8,625,759	)	$	(11,118,256	)

At December 31, 2017 and 2016, 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 35% for 2017, 34.6% for 2016 and 34.4% for 2015, respectively, to income tax expense follows:



For the Years Ended December 31,	2017			2016			2015
Anticipated income tax expense	$	10,594,700		$	9,733,482		$	6,115,306
Increase (decrease) related to:
State income taxes, net of federal income tax benefit	46,150			52,974			22,304
Tax-exempt interest income (net of amortization)	(1,298,251		)	(1,074,504		)	(981,712		)
Tax Cuts and Jobs Act	(5,341,521		)	—			—
Other, net	568,922			(95,952		)	72,102
Provision for income taxes	$	4,570,000		$	8,616,000		$	5,228,000

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, 2017.

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 2014.