Note 5 - Income Tax Provision

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 5. Income Tax Provision

Beginning in 2024, the Company will file a consolidated life insurance federal income tax return. Certain items included in income reported for financial statement purposes are not included in taxable income for the current period, resulting in deferred income taxes.

A reconciliation of federal income tax expense computed by applying the federal income tax rate of 21% to income before federal income tax expense for the years ended December 31, 2024 and 2023, respectively, is summarized as follows:

	December 31, 2024	December 31, 2023
Income before total federal income tax	532,771	625,729
Tax rate	21%	21%
Expected income tax expense (benefit)	111,882	131,403
Effect of tax-exempt income	(15,703)	(28,448)
Other	3,870	6,908
State income tax, net	621	25,749
Return-to-Provision adjustments	(126,482)	(89,557)
Prior period adjustments	120,021	2,741
Change in valuation allowance	(32,417)	(901,143)
Total	61,793	(852,347)

For the year ended December 31, 2024, the Company recognized total tax expense of $61,793. This expense is comprised of current tax expense of $25,646 and a deferred tax expense of $36,147. For the year ended December 31, 2023, the Company recognized a total tax benefit of $(852,347). 

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 2024 and 2023 are summarized as follows:

Deferred Tax Assets	December 31, 2024	December 31, 2023
Net operating and capital loss carryforwards	2,002,668	2,055,140
Unamortized start-up costs	63,302	84,402
Policyowner benefit reserves	2,203,982	2,353,584
Unrealized Losses	753,506	887,427
Tax deferred acquisition costs	1,013,358	903,654
Deferred tax asset valuation allowance	(309,267)	(341,684)
	5,727,548	5,942,523
Deferred Tax Liabilities
GAAP deferred acquisition costs	820,814	993,388
Fixed assets	84,775	89,760
8 year spread	38,905	77,810
Value of business acquired	490,046	509,454
Other GAAP to tax differences	551,125	383,203
	1,985,665	2,053,616
Net deferred tax	3,747,111	3,888,907

The Company has federal net operating loss ("NOL") and capital loss carryforwards of $7,128,060 and $7,425,956 as of December 31, 2024 and 2023, respectively. The federal NOLs generated in the years ended December 31, 2009 through 2017 will begin to expire in 2027 for federal income tax purposes. NOLs originating before January 1, 2018 are eligible to offset taxable income, if not otherwise limited under Internal Revenue Code ("IRC") section 382 limitations. NOLs generated after December 31, 2017, have an indefinite carryforward period and are subject to 80% deduction limitations based upon pre-NOL taxable income.

As of December 31, 2023, the Company changed its tax reserve discounting methodology relating to the cash surrender value of life insurance policies. As a result of this change in method, the Company recognized an additional deferred tax benefit.