7. INCOME TAXES

The Company’s effective tax rate for the six month period ended June 30, 2018, was 17.7%, 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% effective January 1, 2018. We are still analyzing certain aspects of the TCJA and are refining our calculations of existing current and deferred tax amounts. No material changes were made to the tax effects recorded in 2017. Income tax expense for the three and six-month periods ended June 30, 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
	June 30,
	2018		2017
Provision for income taxes at the statutory federal tax rates	$	5,889	$	(123,612)
Increase (reduction) in taxes resulting from:
Dividends received deduction		(8,950)		(9,104)
Tax-exempt interest income		(33,569)		(51,643)
Proration of tax exempt interest and dividends received deduction		10,413		9,112
Officer life insurance, net		3,578		5,793
Nondeductible expenses		9,746		8,530
Prior year true-ups and other		1,734		32,481
Total	$	(11,159)	$	(128,443)



	For the Six-Months Ended
	June 30,
	2018		2017
Provision for income taxes at the statutory federal tax rates	$	182,504	$	323,116
Increase (reduction) in taxes resulting from:
Dividends received deduction		(17,901)		(18,207)
Tax-exempt interest income		(69,892)		(91,981)
Proration of tax exempt interest and dividends received deduction		21,492		16,528
Officer life insurance, net		6,807		10,796
Nondeductible expenses		24,169		17,341
Prior year true-up and other		6,860		78,828
Total	$	154,039	$	336,421

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 as provided for in the Tax Cuts and Jobs Act of 2017. The Tax Cuts and Jobs Act of 2017 provides for a change in the methodology employed to calculate reserves for tax purposes. Beginning January 1, 2018, a higher interest rate assumption and longer payout patterns will be used to discount these reserves. In addition, companies will no longer be able to elect to use their own experience to discount reserves, but will instead be required to use the industry-based tables published by the IRS annually; however, the 2018 tables have yet to be released. Consequently, the company cannot reasonably estimate the impact this would have on deferred taxes at June 30, 2018. 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 a federal rate of 21%.

As of June 30, 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.