Income Tax Matters

9 Months Ended

Sep. 30, 2015

Note 4. Income Tax Matters

Significant components of the Company's deferred tax assets and liabilities as of September 30, 2015 and December 31, 2014 are as follows:

	September 30, 2015			December 31, 2014
Deferred tax assets:
Loss carryforwards	$	7,946,696		$	7,598,830
Capitalized costs		686,512			802,000
Unrealized losses on investments		256,033			121,110
Benefit reserves		1,327,875			1,239,298
Total deferred tax assets		10,217,116			9,761,238
Less valuation allowance		(8,508,966	)		(8,112,743	)
Total deferred tax assets, net of valuation allowance		1,708,150			1,648,495
Deferred tax liabilities:
Policy acquisition costs		674,684			908,021
Due premiums		229,775			220,823
Value of business acquired		543,591			249,351
Intangible assets		238,000			238,000
Property and equipment		22,100			32,300
Total deferred tax liabilities		1,708,150			1,648,495
Net deferred tax assets	$	-		$	-

At September 30, 2015 and December 31, 2014, the Company recorded a valuation allowance of $8,508,966 and $8,112,743, respectively, on the deferred tax assets to reduce the total to an amount that management believes will ultimately be realized. Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income.

Loss carryforwards for tax purposes as of September 30, 2015, have expiration dates that range from 2024 through 2035, as mentioned above.

There was no income tax expense for the three or nine months ended September 30, 2015 and 2014. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 34% to pretax income, as a result of the following:

	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Computed expected income tax benefit	$	(159,751	)	$	(144,621	)	$	(704,841	)	$	(923,615	)
Increase (reduction) in income taxes resulting from:
Meals, entertainment and political contributions		-			9,939			24,084			23,865
Dividends received deduction		7,550			-			(44	)		-
Noncontrolling interests		-			7,401			-			10,597
True-up of benefit reserves and 2014 NOL		160,280			(126,363	)		419,501			(87,864	)
		167,830			(109,023	)		443,541			(53,402	)
Tax benefit before valuation allowance		8,079			(253,644	)		(261,300	)		(977,017	)
Change in valuation allowance		(8,079	)		253,644			261,300			977,017
Net income tax expense	$	-		$	-		$	-		$	-