7. INCOME TAXES

The Company’s effective tax rate for the six month period ended June 30, 2017, was 35.4%, compared to 38.1% 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 and six-month periods ended June 30, 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
	June 30,
	2017		2016
Provision for income taxes at the statutory federal tax rates	$	(123,612)	$	225,579
Increase (reduction) in taxes resulting from:
Dividends received deduction		(9,104)		—
Tax-exempt interest income		(51,643)		(38,931)
15% proration of tax exempt interest and dividends received decution		9,112		5,839
Officer life insurance, net		5,793		5,793
Nondeductible expenses		8,530		111,434
Prior year true-ups and other		32,481		(66,817)
Total	$	(128,443)	$	242,897



	For the Six-Months Ended
	June 30,
	2017		2016
Provision for income taxes at the statutory federal tax rates	$	323,116	$	489,232
Increase (reduction) in taxes resulting from:
Dividends received deduction		(18,207)		—
Tax-exempt interest income		(91,981)		(82,596)
15% proration of tax exempt interest and dividends received decution		16,528		12,389
Officer life insurance, net		10,796		11,587
Nondeductible expenses		17,341		121,654
Prior year true-ups and other		78,828		(3,916)
Total	$	336,421	$	548,350

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 June 30, 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.