Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For interim periods, ProAssurance generally utilizes the estimated annual effective tax rate method under which the Company determines its provision (benefit) for income taxes based on the current estimate of its annual effective tax rate. For the three months ended March 31, 2020, ProAssurance adopted the discrete effective tax rate method to record its provision for income taxes after the estimated annual effective tax rate method produced an unusually low estimated annual tax rate. The discrete effective tax rate method is applied when the application of the estimated annual effective tax rate method is impractical because it is not possible to reliably estimate the annual effective tax rate. The Company believes the use of the discrete effective tax rate method is more appropriate for the current period than the annual effective tax rate method, as minor changes in the Company's estimated ordinary income would have a significant effect on the estimated annual effective tax rate and would result in sizeable variations in the customary relationship between income tax expense (benefit) and pretax accounting income (loss). ProAssurance will reevaluate its use of this method each quarter until the Company believes a return to the estimated annual effective tax rate method is deemed appropriate. The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income (loss) before income taxes primarily due to the tax benefit recognized from tax credits transferred from tax credit partnership investments.

ProAssurance had a receivable for federal and U.K. income taxes carried as a part of other assets of $3.8 million at March 31, 2020 and $8.0 million at December 31, 2019. The liability for unrecognized tax benefits, which is included in the total receivable for federal and U.K. income taxes, was $11.0 million and $5.7 million at March 31, 2020 and December 31, 2019, respectively, which included an accrued liability for interest of approximately $0.6 million at both March 31, 2020 and December 31, 2019.

Tax Cuts and Jobs Act

ProAssurance recognized a nominal amount of tax expense related to the GILTI provision of the TCJA during each of the three months ended March 31, 2020 and 2019. During the three months ended March 31, 2020 and 2019, ProAssurance did not recognize any incremental tax expense related to the BEAT provision of the TCJA. For additional information regarding ProAssurance's accounting for certain provisions of the TCJA, see Note 6 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2019 report on Form 10-K.

Coronavirus Aid, Relief and Economic Security Act

In response to COVID-19, the CARES Act was signed into law on March 27, 2020 and contains several provisions for corporations and eases certain deduction limitations originally imposed by the TCJA. The CARES Act, among other things, includes temporary changes regarding the prior and future utilization of NOLs, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes and the creation of certain refundable employee retention credits. ProAssurance has an NOL of approximately $34.4 million from the 2019 tax year that will be carried back to the 2014 tax year and is expected to generate a tax refund of approximately $12.0 million. ProAssurance is currently evaluating the other provisions of the CARES Act and how certain elections may impact its financial position and results of operations, if elected.