Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Taxes

16. Income Taxes:

The composition of deferred tax assets and liabilities and the related tax effects as of December 31, 2020 and 2019, are as follows (in thousands):

	2020		2019
Deferred tax liabilities:
Deferred policy acquisition costs	$	(3,746)	$	(4,829)
Net unrealized holding gain on investments		(1,579)		(6,408)
Agency relationship		(11)		(17)
Intangible assets		—		(1,882)
Goodwill		—		(357)
Bond amortization		—		(77)
Fixed assets		(1,293)		(1,529)
Other		(343)		(315)
Total deferred tax liabilities		(6,972)		(15,414)
Deferred tax assets:
Unearned premiums		7,639		9,438
Amortization of non-compete agreements		—		36
Intangible assets		308		—
Pension liability		981		842
Net operating loss carry-forward		118		2,154
Unpaid loss and loss adjustment expense		4,688		3,284
Rent reserve		45		18
Bonus accrual		671		722
Deferred social security tax		356		—
Investment impairments		336		489
Other		554		616
Total deferred tax assets		15,696		17,599
Deferred federal income taxes, net	$	8,724	$	2,185

We concluded that no valuation allowance was necessary against our deferred tax assets as of December 31, 2020 and 2019.

A reconciliation of the income tax provisions based on the applicable statutory tax rate of 21% to the provisions reflected in the consolidated financial statements for the years ended December 31, 2020 and 2019, respectively, is as follows (in thousands):

	2020		2019
Computed expected income tax (benefit) expense at statutory tax rate	$	(23,974)	$	(217)
Meals and entertainment		28		102
Tax exempt interest		(300)		(421)
Dividends received deduction		(111)		(191)
Goodwill		7,410		—
State taxes (net of federal benefit)		223		414
Rate differential on NOL		(3,383)		—
True up		(2,369)		—
Other		(31)		(94)
Income tax benefit	$	(22,507)	$	(407)
Current income tax benefit	$	(15,994)	$	(1,224)
Deferred tax (benefit) expense		(6,513)		817
Income tax benefit	$	(22,507)	$	(407)

We have available, for federal income tax purposes, unused net operating loss carryforwards of $0.6 million at December 31, 2020. The Tax Cuts and Jobs Act of 2017 (“TCJA”) generally repealed the previous two year carry-back and 20 year carry-forward provision for net operating losses and adopted an indefinite carry-forward of net operating losses arising in tax years ending after December 31, 2017. However, the TCJA preserved present law for net operating losses of property/casualty insurance companies. Thus, our net operating losses may be carried-back two years and carried-forward 20 years. On March 27, 2020, the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) was signed into law.  The CARES Act grants taxpayers a five-year carry-back period for net operating losses arising in tax years beginning after December 31, 2017 and before January 1, 2021 (i.e. calendar years 2018, 2019 and 2020).

The net operating losses will expire if unused, as follows (in thousands):

Year
2022	$	—
2028		2
2029		25
2031		45
2032		77
2033		73
2034		59
2035		33
2036		50
2037		29
2038		—
2039		—
Indefinite		168
	$	561

We are no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years prior to 2017. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions at December 31, 2020.