7. INCOME TAXES

The Company’s effective tax rate for the nine month period ended September 30, 2018, was 3.1%, compared to -20.0% 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 Tax Act 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 nine-month periods ended September 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
	September 30,
	2018		2017
Provision for income taxes at the statutory federal tax rates	$	(60,088)	$	(248,016)
Increase (reduction) in taxes resulting from:
Dividends received deduction		(8,951)		(9,105)
Tax-exempt interest income		(32,002)		(73,260)
Proration of tax exempt interest and dividends received deduction		10,192		9,664
Officer life insurance, net		3,579		5,794
Nondeductible expenses		12,439		14,089
Prior year true-ups and other		(2,738)		(79,847)
Total	$	(77,569)	$	(380,681)



	For the Nine-Months Ended
	September 30,
	2018		2017
Provision for income taxes at the statutory federal tax rates	$	56,056	$	75,099
Increase (reduction) in taxes resulting from:
Dividends received deduction		(26,852)		(27,311)
Tax-exempt interest income		(101,894)		(165,241)
Proration of tax exempt interest and dividends received deduction		31,684		26,192
Officer life insurance, net		10,386		16,590
Nondeductible expenses		36,608		31,430
Prior year true-up and other		2,221		(1,019)
Total	$	8,209	$	(44,260)

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 Act. The Tax Act 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 Internal Revenue Service (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 September 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 September 30, 2018 and December 31, 2017, the Company does not have any capital or operating loss carryforwards. Periods still subject to IRS audit include 2014 through current year. There are currently no open tax exams.