FEDERAL INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

FEDERAL INCOME TAXES

6. FEDERAL INCOME TAXES

The components of the provision for income taxes are summarized as follows for the years ended December 31, 2013, 2012 and 2011, respectively:

	2013			2012			2011
Current tax expense:
Federal	$	811,632		$	973,336		$	335,214
State and local		13,610			20,128			18,617
Total current tax expense		825,242			993,464			353,831
Deferred tax (benefit) expense:
Federal		(64,374	)		(264,378	)		1,941
State and local		(6,029	)		(8,649	)		363
Total deferred tax (benefit) expense		(70,403	)		(273,027	)		2,304
Total provision for income taxes	$	754,839		$	720,437		$	356,135

Deferred tax assets and liabilities are comprised of the following:

	2013			2012
Deferred tax assets:
Unearned premiums	$	107,785		$	81,336
Net operating loss		37,490			41,665
Recapitalization Intangible		48,234
Discounting on claims payable		8,021			10,272
Accrued vacation		74,228			67,469
Accrued commissions		166,610			176,355
Deferred compensation		701,346			548,458
Accrued professional fees		43,282			42,534
Property and equipment					30,482
Other, net		32,775			43,290
Gross deferred tax assets		1,219,771			1,041,861
Valuation Allowance		(48,234	)
Gross deferred tax assets, net of valuation allowance		1,171,537			1,041,861
Deferred tax liabilities:
Unrealized gain on investments		10,192			71,577
Deferred policy acquisition costs		111,355			60,644
Prepaid insurance		66,154			55,880
Property and equipment		3,503
Identifiable intangible assets		32,790			38,008
Gross deferred tax liabilities		223,994			226,109
Net deferred tax asset	$	947,543		$	815,752

Management believes it is more likely than not that deferred tax assets will reduce future income tax payments. Significant factors considered by management in its determination of the probability of the realization of the deferred tax benefits include the historical operating results and the expectations of future earnings. The Company had $110,265, $122,544, and $122,547 of net operating loss carry forwards to utilize in future years at December 31, 2013, 2012, and 2011, respectively. These losses will expire between 2018 and 2024. Net deferred tax assets are included in other assets in the accompanying consolidated balance sheets at December 31, 2013 and 2012.

The Company’s effective tax rate was different from the U.S statutory rate due to the following:

	2013		2012		2011		2013 Effective Tax Rate			2012 Effective Tax Rate			2011 Effective Tax Rate
Provision computed at statutory rate	$	692,391	$	693,074	$	321,996		34.0	%		34.0	%		34.0	%
State and local taxes		2,954		4,864		12,606		0.1			0.2			1.4
Nondeductible meals, entertainment and legal expense		9,453		8,815		19,858		0.5			0.4			2.1
Valuation Allowance		48,243						2.4
Other—net		1,798		13,684		1,675		0.1			0.7			0.1
Provision for income taxes	$	754,839	$	720,437	$	356,135		37.1	%		35.3	%		37.6	%

On September 13, 2013, the Internal Revenue Service released final tangible property regulations under Sections 162(a) and 263(a) of the Internal Revenue Code of 1986 (“Code”), regarding the deduction and capitalization of expenditures related to tangible property. The final regulations replace temporary regulations that were issued in December 2011. Also released were proposed regulations under Section 168 of the Code regarding dispositions of tangible property. These regulations generally apply to taxable years beginning on or after January 1, 2014.