Income Taxes

We file a consolidated federal income tax return with Farm Bureau Life and FBL Financial Services, Inc. and certain of their subsidiaries. The companies included in the consolidated federal income tax return each report current income tax expense as allocated under a consolidated tax allocation agreement. This allocation typically results in profitable companies recognizing a tax provision as if the individual company filed a separate return and loss companies recognizing a benefit to the extent their losses contribute to reduce consolidated taxes.

Deferred income taxes have been established based upon the temporary differences between the financial statement and income tax bases of assets and liabilities. The reversal of the temporary differences will result in taxable or deductible amounts in future years when the related asset or liability is recovered or settled. A valuation allowance is required if it is more likely than not that a deferred tax asset will not be realized. In assessing the need for a valuation allowance we considered the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income from prior years available for recovery and tax planning strategies. Based on the available positive and negative evidence regarding future sources of taxable income, we have determined that the establishment of a valuation allowance was not necessary at December 31, 2016 and 2015.



Income Tax Expenses (Credits)

	Year ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Taxes provided in consolidated statements of operations on:
Income before equity loss:
Current	$	36,461		$	40,578		$	39,562
Deferred	9,549			6,840			7,773
	46,010			47,418			47,335
Equity loss, including low income housing tax credits	(15,498		)	(15,706		)	(13,372		)

Taxes provided in consolidated statements of changes in stockholders' equity:
Accumulated other comprehensive income	18,882			(77,473		)	75,032
Class A and Class B common stock	(846		)	(1,363		)	(1,148		)
	18,036			(78,836		)	73,884
	$	48,548		$	(47,124	)	$	107,847



Effective Tax Rate Reconciliation to Federal Income Tax Rate

	Year ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Income before income taxes and equity loss	$	141,789		$	151,368		$	147,101

Income tax at federal statutory rate (35%)	$	49,626		$	52,979		$	51,485
Tax effect (decrease) of:
Tax-exempt dividend and interest income	(2,950		)	(3,233		)	(3,400		)
Other items	(666		)	(2,328		)	(750		)
Income tax expense	$	46,010		$	47,418		$	47,335

In 2015, the other items affecting the effective tax rate include a $1.8 million tax benefit resulting from the disposition of an equity method investment, for which the carrying value consisted solely of nondeductible goodwill.



Tax Effect of Temporary Differences Giving Rise to Deferred Income Tax Assets and Liabilities

	December 31,
	2016		2015
	(Dollars in thousands)
Deferred income tax assets:
Future policy benefits	$	30,340	$	25,918
Accrued benefit and compensation costs	10,001		15,138
Loss carryforwards	5,709		8,212
Other	2,393		4,030
	48,443		53,298
Deferred income tax liabilities:
Fixed maturity and equity securities	131,655		94,919
Deferred acquisition costs	62,599		65,310
Value of insurance in force acquired	3,229		7,320
Property and equipment	7,777		7,078
Other	6,678		13,734
	211,938		188,361
Net deferred income tax liability	$	163,495	$	135,063

We recognize the benefits of uncertain tax positions in accordance with the provisions of the FASB interpretation on accounting for uncertainty in income taxes. We had no reserve for uncertain tax positions at December 31, 2016, and less than $0.1 million at December 31, 2015. Unrecognized tax benefits included in our reserve, if recognized, would impact our effective tax rate, although we do not expect these impacts to be material. We recognize interest related to unrecognized tax benefits in interest expense and related penalties in other expenses. We paid no such interest and penalties related to federal income taxes during 2016 or 2015. We do not expect any significant increases or decreases in the amount of our reserve for uncertain tax positions within the next twelve months. We are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years prior to 2013.

At December 31, 2016, we had non-life net operating loss carryforwards for federal income tax purposes totaling $15.7 million, which expire beginning in 2033. We also had non-life net operating loss carryforwards in several state jurisdictions, with varying expiration dates. State deferred taxes are not generally provided on any temporary differences or carryforwards, as state taxes have historically been insignificant.

We invest in LIHTC, which generate pre-tax losses but after-tax gains as the related tax credits are realized. The timing of the realization of tax credits is subject to fluctuation from period to period due to the timing of housing project completions and the approval of tax credits. These tax credits, which are reported in equity income, totaled $14.1 million in 2016, $13.5 million in 2015 and $12.2 million in 2014.