Taxes On Income (Tables)

12 Months Ended

Dec. 31, 2020

Taxes On Income

Provision for taxes

The provision for taxes on income consists of the following:

	Year ended December 31
	2020			2019
Federal expense (benefit):
Current	$	—		$	13,809
Deferred		3,566,840			(51,809	)
Total tax expense (benefit)	$	3,566,840		$	(38,000	)
State expense (benefit):
Current	$	8,800		$	8,800
Deferred		(28,042	)		(104,987	)
Total tax benefit	$	(19,242	)	$	(96,187	)
Total expense (benefit):
Current	$	8,800		$	22,609
Deferred		3,538,798			(156,796	)
Total tax expense (benefit)	$	3,547,598		$	(134,187	)

Reconcilation of income tax provision and expected income tax

The income tax provision reflected in the Consolidated Statements of Operations is different than the expected federal income tax rate of 21% on income as shown in the following table:

	Year ended December 31
	2020			2019
Computed income tax benefit at 21%	$	(3,768,138	)	$	(682,477	)
Tax effect of:
State tax benefit, net of federal tax benefit		(572,511	)		(139,765	)
Change in valuation allowance – state net operating losses		557,310			63,777
Change in valuation allowance – federal		7,319,959			600,000
Other, including nondeductible expenses		10,920			23,989
Other – prior year true up		58			289
Income tax expense (benefit)	$	3,547,598		$	(134,187	)

Components of net deferred tax assets

Significant components of the Company’s net deferred tax assets and liabilities are as follows:

	Year ended December 31
	2020		2019
Deferred tax assets:
Discount on loss reserves	$	531,845	$	329,065
Unearned premium		759,659		747,217
Unearned commission income		438,574		432,969
Unearned policy fee income		127,293		145,533
Net operating loss carryforwards		7,769,603		4,145,783
State net operating loss carryforwards		2,402,438		1,931,665
Bad debt reserve		333,649		336,075
Other		237,803		205,292
Total gross deferred tax assets		12,600,864		8,273,599
Less valuation allowance		10,557,080		2,531,665
Total deferred tax assets	$	2,043,784	$	5,741,934
Deferred tax liabilities:
Policy acquisition costs	$	858,705	$	892,349
State tax on undistributed insurance company earnings		84,219		343,735
Federal tax liability on state deferred tax assets		91,277		90,461
Depreciation and amortization		266,880		175,524
Unrealized gains on investments		742,703		314,433
Total deferred tax liabilities	$	2,043,784	$	1,816,502
Net deferred tax assets	$	—	$	3,925,432