9) Income Taxes

12 Months Ended

Dec. 31, 2020

Disclosure Text Block [Abstract]

9) Income Taxes

9)       Income Taxes

The Company’s income tax liability is summarized as follows:

	December 31
	2020	2019
Current	$    2,595,877	$    1,410,153
Deferred	22,662,923	17,276,819
Total	$  25,258,800	$   18,686,972

Significant components of the Company’s deferred tax (assets) and liabilities are approximately as follows:

	December 31
	2020	2019
Assets
Future policy benefits	$  (12,657,045)	$  (12,450,229)
Loan loss reserve	(5,352,942)	(1,053,256)
Unearned premium	(699,011)	(760,556)
Net operating loss	(334,085)	(438,420)
Deferred compensation	(2,833,298)	(1,996,865)
Deposit obligations	(610,041)	(619,633)
Other	(1,269,533)	(1,020,718)
Less: Valuation allowance	961,920	2,439,394
Total deferred tax assets	(22,794,035)	(15,900,283)
Liabilities
Deferred policy acquisition costs	16,430,001	15,536,717
Basis difference in property, equipment and real estate	5,312,787	3,638,512
Value of business acquired	1,880,602	2,074,096
Deferred gains	12,124,226	5,169,104
Trusts	1,064,387	1,064,387
Tax on unrealized appreciation	8,644,955	5,694,286
Total deferred tax liabilities	45,456,958	33,177,102
Net deferred tax liability	$  22,662,923	$   17,276,819

The valuation allowance relates to differences between recorded deferred tax assets and liabilities and ultimate anticipated realization.  The Company has recorded a valuation allowance related to Kilpatrick Life Insurance Company that was acquired in December 2019.

The Company paid $11,813,120 and $4,861,318 in income taxes for the years ended December 31, 2020 and 2019, respectively.

The Company’s income tax expense is summarized as follows for the years ended December 31:

	2020	2019
Current
Federal	$  10,678,612	$    4,404,041
State	2,320,233	504,272
	12,998,845	4,908,313
Deferred
Federal	2,677,943	(1,551,725)
State	176,726	(306,172)
	2,854,669	(1,857,897)
Total	$  15,853,514	$    3,050,416

The reconciliation of income tax expense at the U.S. federal statutory rates is as follows:

	2020	2019
Computed expense at statutory rate	$  15,004,527	$    2,928,226
State tax expense, net of federal tax benefit	1,972,598	156,499
Change in valuation allowance	(1,477,474)	194,364
Other, net	353,863	(228,673)
Income tax expense	$  15,853,514	$    3,050,416

The Company’s overall effective tax rate for the years ended December 31, 2020 and 2019 was 22.2% and 21.9% respectively.  The Company’s effective tax rates differ from the U.S. federal statutory rate of 21% partially due to its provision for state income taxes and a decrease to the valuation allowance related to Kilpatrick Life Insurance Company that decreased the effective income tax rate when compared to the prior year.

At December 31, 2020, the Company had no significant unrecognized tax benefits. As of December 31, 2020, the Company does not expect any material changes to the estimated amount of unrecognized tax benefits in the next twelve months. Federal and state income tax returns for 2017 through 2020 are subject to examination by taxing authorities.

Net Operating Losses and Tax Credit Carryforwards:

Year of Expiration
2021	$       17,100
2022	-
2023	-
2024	-
2025	-
Thereafter up through 2037	1,405,155
	$   1,422,255