Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of the following for the years ended December 31:

(in thousands)
	2021		2020		2019
Current income tax expense	$	80,398	$	80,373	$	76,535
Deferred income tax (benefit) expense	(1,854)		(5,162)		3,349
Income tax expense	$	78,544	$	75,211	$	79,884

A reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rate to pre-tax income, is as follows for the years ended December 31:

(in thousands)
	2021		2020		2019
Income tax at statutory rate	$	79,045	$	77,388	$	83,308
Tax-exempt interest	—		—		(123)
Decrease in unrecognized tax benefits	—		—		(3,088)
Other, net	(501)		(2,177)		(213)
Income tax expense	$	78,544	$	75,211	$	79,884

Temporary differences and carry-forwards, which give rise to deferred tax assets and liabilities, are as follows as of December 31:

(in thousands)
	2021		2020
Deferred tax assets:
Pension and other postretirement benefits	$	21,545	$	29,065
Other employee benefits	15,273		14,544
Deferred revenue	3,963		3,872
Allowance for management fee returned on cancelled policies	3,330		3,515
Unrealized losses on investments	—		1,083
Other	3,484		2,692
Total deferred tax assets	47,595		54,771
Deferred tax liabilities:
Depreciation	35,204		29,978
Unrealized gains on investments	8,713		7,540
Prepaid expenses	2,458		3,800
Other	1,075		1,112
Total deferred tax liabilities	47,450		42,430
Net deferred tax asset	$	145	$	12,341

If we determine that any of our deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of the assets that are not expected to be realized. We had no valuation allowance recorded at December 31, 2021 or 2020.

A reconciliation of unrecognized tax benefits for the years ended December 31 is as follows:

(in thousands)
	2021		2020		2019
Balance at the beginning of the year	$	0	$	0	$	3,088
Additions for prior year tax positions	—		—		4,631
Reductions for prior year tax positions	—		—		(7,719)
Balance at the end of the year	$	0	$	0	$	0

The uncertain tax position including $3.1 million of tax expense and $0.9 million of interest expense recorded in a prior year was settled during 2019. This settlement reduced our effective tax rate by 1.0% in 2019. The amounts recorded in a prior year resulted from the difference in measuring the tax liability at the previous tax rate and the current enacted tax rate.

Tax years ending December 31, 2020, 2019 and 2018 remain open to IRS examination. We are not currently under IRS audit, nor have we been notified of an upcoming IRS audit.

We are the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurance exchange.  In that capacity, we provide all services and facilities necessary to conduct the Exchange's insurance business.  Indemnity and the Exchange together constitute a single insurance business.  Consequently, we are not subject to state corporate income or franchise taxes in states where the Exchange conducts its business and the states collect premium tax in lieu of corporate income or franchise tax, as a result of the Exchange's remittance of premium taxes in those states.