7. INCOME TAXES

The Company’s effective tax rate for the three month period ended March 31, 2018, was 19.6%, compared to 35.4% for the same period in 2017. Effective rates are dependent upon components of pretax earnings and the related tax effects.

The Tax Cuts and Jobs Act of 2017 (the Tax Act) lowered the federal corporate tax rate to 21 percent effective January 1, 2018. Income tax expense for the three-month periods ended March 31, 2018 and 2017, differed from the amounts computed by applying the U.S. federal tax rate of 21% and 34%, respectively, to pretax income from continuing operations as demonstrated in the following tables:



	For the Three-Months Ended
	March 31,
	2018		2017
Provision for income taxes at the statutory federal tax rates	$	176,615	$	446,729
Increase (reduction) in taxes resulting from:
Dividends received deduction		(8,951)		(9,104)
Tax-exempt interest income		(36,323)		(40,338)
15% proration of tax exempt interest and dividends received deduction		11,079		7,416
Officer life insurance, net		3,229		5,003
Nondeductible expenses		14,423		8,811
Prior year true-up and other		5,126		46,347
Total	$	165,198	$	464,864

The Company had historically recorded its deferred tax assets and liabilities using the statutory federal tax rate of 34%. As a result, the Company revalued deferred tax items as of December 31, 2017 to reflect the lower rate. 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, management believes that when these deferred items reverse in future years, taxable income will be taxed at an effective rate of 21%.

As of March 31, 2018 and December 31, 2017, the Company does not have any capital or operating loss carryforwards. Periods still subject to Internal Revenue Service (IRS) audit include 2014 through current year. There are currently no open tax exams.