Income Taxes

3 Months Ended

Mar. 31, 2014

Income Taxes [Abstract]

Income Taxes

Note 5. Income Taxes

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and income tax expense is as follows:

	Three Months Ended March 31,
	2014			2013
Federal income tax provision at statutory rate of 35%	$	348		$	354
Dividends-received deduction		(31	)		(37	)
Small life insurance company deduction		(116	)		-
Other permanent differences		10			9
Change in asset valuation allowance due to change in judgment relating to realizability of deferred tax assets		(38	)		(237	)
Income tax expense	$	173		$	89

The components of income tax expense were:

	Three Months Ended March 31,
	2014			2013
Current – Federal	$	63		$	2
Deferred – Federal		148			324
Change in deferred tax asset valuation allowance		(38	)		(237	)
Total	$	173		$	89

The primary differences between the effective tax rate and the federal statutory income tax rate for the three month period ended March 31, 2014 resulted from the dividends-received deduction (“DRD”), the small life insurance company deduction (“SLD”) and the change in deferred tax asset valuation allowance.  The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income.  The SLD varies in amount and is determined at a rate of 60 percent of the tentative life insurance company taxable income (“LICTI”).  The SLD for any taxable year is reduced (but not below zero) by 15 percent of the tentative LICTI for such taxable year as it exceeds $3,000 and is ultimately phased out at $15,000.  The change in deferred tax asset valuation allowance was due to the unanticipated utilization of certain capital loss carryforward benefits that had been previously reduced to zero through an existing valuation allowance reserve.

The primary differences between the effective tax rate and the federal statutory income tax rate for the three month period ended March 31, 2013 resulted from the DRD and the change in deferred tax asset valuation allowance.  The change in deferred tax asset valuation allowance was also due to the utilization of certain capital loss carryforward benefits.