Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

(in thousands)	2020		2019
Current:
Federal	$	8,886	$	5,945
State	137		142
Total current	9,023		6,087
Deferred:
Federal	1,236		2,280
State	(18)		(2)
Total deferred	1,218		2,278
Total	$	10,241	$	8,365

For state income tax purposes, ITIC and NITIC generally pay only a gross premium tax found in other expenses in the Consolidated Statements of Operations.

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

(in thousands)	2020		2019
Deferred income tax assets:
Accrued benefits and retirement services	$	3,189	$	3,049
Other-than-temporary impairment of assets	167		178
Net operating loss carryforward	118		77
Allowance for doubtful accounts	65		91
Postretirement benefit obligation	39		9
Reinsurance and commission payable	9		36
Other	1,129		1,329
Total	4,716		4,769
Deferred income tax liabilities:
Net unrealized gain on investments	8,090		6,691
Recorded reserve for claims, net of statutory premium reserves	1,199		1,096
Excess of tax over book depreciation	1,149		947
Intangible assets	1,086		1,168
Other	1,784		1,905
Total	13,308		11,807
Net deferred income tax liabilities	$	(8,592)	$	(7,038)

At December 31, 2020 and 2019, there were no valuation allowances 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.

As computed for the years ended December 31 at the U.S. federal statutory income tax rate of 21.0% for 2020 and 2019, to income tax expense follows:

(in thousands)	2020		2019
Anticipated income tax expense	$	10,429	$	8,362
Increase (decrease) related to:
State income taxes, net of federal income tax benefit	108		112
Tax-exempt interest income, net of amortization	(1,199)		(900)
Other, net	903		791
Provision for income taxes	$	10,241	$	8,365

In accounting for uncertainty in income taxes, the Company is required to recognize in its consolidated 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, 2020.

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 Expenses line item in the Consolidated Statements of Operations.

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 2017.