Income Taxes (Tables)

3 Months Ended

Mar. 31, 2025

Schedule of Deferrred Tax Assets and Liabilities

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


	March 31, 2025		December 31, 2024

Deferred tax asset:
Net operating loss carryovers (1)	$	—	$	419,357
Claims reserve discount	1,418,989		1,305,466
Unearned premium	4,569,622		3,810,973
Deferred ceding commission revenue	1,487,860		2,423,660
Net unrealized losses on securities	2,651,848		3,069,900
Other	1,057,826		834,921
Total deferred tax assets	11,186,145		11,864,277

Deferred tax liability:
Investment in KICO (2)	759,543		759,543
Deferred policy acquisition costs	5,124,208		5,193,798
Intangible assets	105,000		105,000
Depreciation and amortization	64,624		208,016
Total deferred tax liabilities	6,053,375		6,266,357

Net deferred income tax asset	$	5,132,770	$	5,597,920

(1)The deferred tax assets from net operating loss carryovers (“NOL”) are as follows:


Type of NOL	March 31, 2025		December 31, 2024		Expiration

Federal only, NOL from 2024 and 2023	$	—	$	419,357	None

State only (A)	3,158,937		3,075,395		December 2027 - December 2045
Valuation allowance	(3,158,937)		(3,075,395)
State only, net of valuation allowance	-		-

Total deferred tax asset from net operating loss carryovers	$	—	$	419,357

(A)Kingstone generates operating losses for state purposes and has prior year NOLs available. The state NOL as of March 31, 2025 and December 31, 2024 was $48,599,031 and $47,313,775, respectively. KICO, the Company’s insurance underwriting subsidiary, is not subject to state income taxes. KICO’s state tax obligations are paid through a gross premiums tax, which is included in the condensed consolidated statements of income and comprehensive income within other underwriting expenses. Kingstone has recorded a full valuation allowance due to the uncertainty of generating enough state taxable income to utilize 100% of the available state NOLs over their remaining lives, which expire between 2027 and 2045.

(2)Deferred tax liability – Investment in KICO

On July 1, 2009, the Company completed the acquisition of 100% of the issued and outstanding common stock of KICO (formerly known as Commercial Mutual Insurance Company (“CMIC”)) pursuant to the conversion of CMIC from an advance premium cooperative to a stock property and casualty insurance

company. Pursuant to the plan of conversion, the Company acquired a 100% equity interest in KICO, in consideration for the exchange of $3,750,000 principal amount of surplus notes of CMIC. In addition, the Company forgave all accrued and unpaid interest on the surplus notes as of the date of conversion. As of the date of acquisition, unpaid accrued interest on the surplus notes along with the accretion of the discount on the original purchase of the surplus notes totaled $2,921,319 (together “Untaxed Interest”). As of the date of acquisition, the deferred tax liability on the Untaxed Interest was $1,169,000. A temporary difference with an indefinite life exists when the parent has a lower carrying value of its subsidiary for income tax purposes. The deferred tax liability was reduced to $759,543 upon the reduction of federal income tax rates as of December 31, 2017. The Company is required to maintain its deferred tax liability of $759,543 related to this temporary difference until the stock of KICO is sold, or the assets of KICO are sold or KICO and the parent are merged.

Schedule of Net Operating Loss Carryovers

The deferred tax assets from net operating loss carryovers (“NOL”) are as follows:


Type of NOL	March 31, 2025		December 31, 2024		Expiration

Federal only, NOL from 2024 and 2023	$	—	$	419,357	None

State only (A)	3,158,937		3,075,395		December 2027 - December 2045
Valuation allowance	(3,158,937)		(3,075,395)
State only, net of valuation allowance	-		-

Total deferred tax asset from net operating loss carryovers	$	—	$	419,357