7. INCOME TAXES

The Company’s effective tax rate for the three month period ended March 31, 2017, was 35.4%, compared to 39.4% for the same period in 2016. Effective rates are dependent upon components of pretax earnings and the related tax effects.

Income tax expense for the three-month periods ended March 31, 2017 and 2016, differed from the amounts computed by applying the U.S. federal tax rate of 34% to pretax income from continuing operations as demonstrated in the following tables:



	For the Three-Months Ended
	Ended March 31,
	2017		2016
Provision for income taxes at the statutory federal tax rates	$	446,729	$	263,653
Increase (reduction) in taxes resulting from:
Dividends received deduction		(9,104)		—
Tax-exempt interest income		(40,338)		(43,665)
15% proration of tax exempt interest and dividends received decution		7,416		6,550
Officer life insurance, net		5,003		5,794
Nondeductible expenses		8,811		10,220
Prior year true-ups and other		46,347		62,901
Total	$	464,864	$	305,453

The Company has recorded its deferred tax assets and liabilities using the statutory federal tax rate of 34%. Management believes it is more likely than not that all deferred tax assets will be recovered as the result of future operations, which will generate sufficient taxable income to realize the deferred tax asset. In addition, it is believed that when these deferred items reverse in future years, taxable income will be taxed at an effective rate of 34%.

As of March 31, 2017 and December 31, 2016, the Company does not have any capital or operating loss carryforwards. Periods still subject to Internal Revenue Service (IRS) audit include 2013 through current year. There are currently no open tax exams.