8. Income Taxes

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


For the Years Ended December 31,		2011			2010
Current:
Federal	$	2,515,000		$	1,388,000
State		29,000			23,000
Total current		2,544,000			1,411,000
Deferred:
Federal		28,131			825,465
State		(7,131	)		6,535
Total deferred		21,000			832,000
Total	$	2,565,000		$	2,243,000

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,		2011			2010
Deferred income tax assets:
Recorded reserves for claims, net of statutory premium reserves	$	-		$	29,911
Accrued benefits and retirement services		2,491,168			2,215,857
Postretirement benefit obligation		28,026			-
Other-than-temporary impairment of assets		434,929			420,305
Reinsurance and commissions payable		38,969			25,302
Allowance for doubtful accounts		414,120			483,140
Net operating loss carryforward		30,000			49,000
Capital loss carryforward		5,194			-
Excess of book over tax depreciation		113,648			90,352
Other		491,479			416,214
Total		4,047,533			3,730,081
Deferred income tax liabilities:
Recorded reserves for claims, net of statutory premium reserves		290,318			-
Net unrealized gain on investments		3,956,708			2,986,999
Postretirement benefit obligation		-			6,785
Discount accretion on tax-exempt obligations		-			23,813
Other		279,870			235,950
Total		4,526,896			3,253,547
Net deferred income tax (liabilities) assets	$	(479,363	)	$	476,534

At December 31, 2011 and 2010, 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 (34%) to income tax expense follows:


For the Years Ended December 31,		2011			2010
Anticipated income tax expense	$	3,229,638		$	2,929,313
Increase (decrease) related to:
State income taxes, net of federal income tax benefit		19,140			15,180
Tax-exempt interest income (net of amortization)		(700,300	)		(743,025	)
Other, net		16,522			41,532
Provision for income taxes	$	2,565,000		$	2,243,000

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, 2011.

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 2008.