INCOME TAXES

On December 22, 2017, the President signed the Tax Cuts and Jobs Act (TCJA), a comprehensive tax legislation which, among other things, reduced the Company's statutory federal income tax rate from 34% to 21% effective January 1, 2018. In addition to the reduction in tax rates, the TCJA makes broad and complex changes to the Internal Revenue Code that will introduce changes to many tax related exclusions, deductions and credits. At December 31, 2017, $1,575,000 in AMT credit was booked as a deferred tax asset. Effective December 31, 2018, the Company recognized the AMT credit in federal income tax recoverable as Management anticipates $1,077,000 will be recovered with the 2018 return and the remainder recovered by 2021 pursuant to allowable amounts under the TCJA. Management believes that, based on its historical pattern of taxable income, the Company will produce sufficient income in the future to realize its deferred tax assets. The Company recognized net deferred tax asset positions of $716,000 at December 31, 2018 and $1,487,000 at December 31, 2017.

The tax effect of significant differences representing deferred tax assets and liabilities are as follows (dollars in thousands):



	As of December 31, 2018			As of December 31, 2017
General expenses	$	1,067		$	1,069
Unearned premiums	1,265			1,269
Claims liabilities	552			484
AMT credit	—			1,575
Impairment on real estate owned	119			116
Unrealized losses on securities available-for-sale	368			—
Unrealized loss on interest rate swaps	49			128
Deferred tax assets	3,420			4,641

Depreciation	(79		)	(88		)
Deferred policy acquisition costs	(1,645		)	(1,706		)
Pre-1984 policyholder surplus account	(463		)	(529		)
Unrealized gains on securities available-for-sale	—			(831		)
Unrealized gains on equity securities	(517		)	—
Deferred tax liabilities	(2,704		)	(3,154		)
Net deferred tax asset	$	716		$	1,487

The appropriate income tax effects of changes in temporary differences are as follows (dollars in thousands):



	Years ended December 31,
	2018			2017
Deferred policy acquisition costs	$	(61	)	$	(77	)
Other-than-temporary impairments	(3		)	—
Unearned premiums	4			(10		)
General expenses	2			(45		)
Depreciation	(9		)	7
Claims liabilities	(68		)	(38		)
AMT credit	1,575			(345		)
Impact of repeal of special provision on pre-1984 policyholder surplus	(66		)	857
Unrealized gains on equity securities	(43		)	—
Impact of TCJA change in corporate tax rate	—			(54		)
Deferred income tax expense (benefit)	$	1,331		$	295

Total income tax expense (benefit) varies from amounts computed by applying current federal income tax rates to income or loss before income taxes. The reasons for these differences and the approximate tax effects are as follows:



	Years ended December 31,
	2018		2017
Federal income tax rate applied to pre-tax income/loss	21.0	%	34.0	%
Dividends received deduction and tax-exempt interest	(2.4	)%	5.8	%
Company owned life insurance	7.4	%	3.4	%
Small life deduction	—	%	30.7	%
Pre-1984 policyholder surplus account at current statutory rate	—	%	(76.9	)%
Other, net	0.9	%	(5.0	)%
Effective federal income tax rate	26.9	%	(8.0	)%

The Company recognizes tax-related interest and penalties as a component of tax expense. The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is not subject to examinations by authorities related to its U.S. federal or state income tax filings for years prior to 2014. Tax returns have been filed through the year 2017.