Federal Income Tax

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Federal Income Tax

FEDERAL INCOME TAX

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has considered the implications of the CARES Act on its tax provision and has included an income tax benefit of $18,562 as the result of this Act in 2020.

Federal income tax expense (benefit)  is composed of the following:

Years Ended December 31,	2021		2020		2019
Current	$	11,081	$	(46,861)	$	(7,843)
Deferred	5,168		(9,948)		9,902
Total	$	16,249	$	(56,809)	$	2,059

A reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of 21.0 percent in 2021, 2020 and 2019 to the amount recorded in the accompanying Consolidated Statements of Income and Comprehensive Income is as follows:

Years Ended December 31,	2021		2020		2019
Computed expected income tax expense (benefit)	$	20,337	$	(35,598)	$	3,544
The CARES Act	—		(18,562)		—
Tax-exempt municipal bond interest income	(3,412)		(3,669)		(3,961)
Nontaxable dividend income	(361)		(517)		(594)
Goodwill impairment	—		3,169		—
Compensation	770		695		1,638
Reinsurance			—		998
Research and development credit	(1,545)		(2,045)		—
Other, net	460		(282)		434
Consolidated federal income tax expense (benefit)	$	16,249	$	(56,809)	$	2,059

We measure certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21.0 percent. The significant components of our net deferred tax liability at December 31, 2021 and 2020 are as follows:

December 31,	2021		2020
Deferred tax liabilities
Net unrealized appreciation on investment securities:
Equity securities	$	27,047	$	33,096
All other securities	13,229		22,082
Deferred policy acquisition costs	19,204		18,289
Investments in partnerships	3,229		964
Prepaid pension cost	3,725		4,553
Over funded pension benefit	1,214		—
Net bond discount accretion	323		383
Depreciation	4,097		4,187
Revaluation of investment basis (1)	—		325
Identifiable intangible assets (1)	1,242		1,391
Capitalized Software	6,351		4,891
Other	2,183		1,568
Gross deferred tax liability	81,844		$	91,729
Deferred tax assets
Financial statement reserves in excess of income tax reserves	$	22,879	$	23,851
Unearned premium adjustment	17,296		18,979
Employee profit sharing	2,515		974
Underfunded benefit plan obligation	—		4,295
Post-retirement benefits other than pensions	2,650		9,533
Other-than-temporary impairment of investments	1,529		1,974
Compensation expense related to stock options	1,989		2,307
Nonqualified deferred compensation	2,574		2,066
Other	3,659		2,821
Deferred tax asset	$	55,091	$	66,800
Net deferred tax liability	$	26,753	$	24,929

(1) Related to our acquisition of Mercer Insurance Group, Inc.