Note 8.

Income Taxes

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Federal income tax provision at statutory rate of 21% and 35% for 2018 and 2017, respectively	$	847		$	764		$	(487	)	$	643
Dividends-received deduction		(10	)		(24	)		(20	)		(48	)
Small life insurance company deduction		-			(30	)		-			(30	)
Other permanent differences		11			15			28			34
Income tax expense (benefit)	$	848		$	725		$	(479	)	$	599

The components of income tax expense (benefit) were:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018			2017
Current - Federal	$	703	$	1,063		$	739		$	1,063
Deferred - Federal		145		(338	)		(1,218	)		(464	)
Total	$	848	$	725		$	(479	)	$	599

The primary difference between the effective tax rate and the federal statutory income tax rate for the three month and six month periods ended June 30, 2018 resulted from the dividends-received deduction (“DRD”). 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 primary differences between the effective tax rate and the federal statutory income tax rate for the three month and six month periods ended June 30, 2017 resulted from the DRD and the small life insurance company deduction (“SLD”), which was subsequently repealed by tax reform enacted on December 22, 2017. Under the then-applicable tax rules, the SLD varied in amount and was determined at a rate of 60 percent of the tentative life insurance company taxable income (“LICTI”). The SLD for any taxable year was reduced (but not below zero) by 15 percent of the tentative LICTI for such taxable year as it exceeded $3,000 and was ultimately phased out at $15,000.