Note 9. Income Tax Matters

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows:


	December 31, 2019		December 31, 2018
Deferred tax assets:
Loss carryforwards	$	436,777	$	1,429,458
Capitalized costs		221,918		269,472
Stock option granted		4,566
Unrealized losses on investments		—		390,349
Policy acquisition costs		1,468,030		—
Charitable contribution carryforward		1,020		—
Property and equipment		15,508		—
Benefit reserves		848,643		192,858
Total deferred tax assets		2,996,462		2,282,137
Less valuation allowance		(2,618,741)		(1,928,454)
Total deferred tax assets, net of valuation allowance		377,721		353,683
Deferred tax liabilities:
Unrealized losses on investments		116,088		—
Due premiums		81,789		117,144
Intangible assets		147,000		147,000
Policy loans		32,844		86,245
Property and equipment		—		3,294
Total deferred tax liabilities		377,721		353,683
Net deferred tax assets	$	—	$	—

At December 31, 2019 and 2018, the Company recorded a valuation allowance of $2,618,741 and $1,928,454, 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 carry forwards are expected to be available to reduce taxable income.

There was income tax expense of $234,180 for the year ended December 31, 2019, and no income tax expense for the year ended December 31, 2018. This differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax income, as a result of the following:


	Year ended December 31,
	2019		2018
Computed expected income tax benefit	$	(1,154,890)	$	(1,063,749)
Increase (reduction) in income taxes resulting from:
Meals, entertainment and political contributions		6,170		8,402
Change in loss carryforward due to 382 limitation		—		5,595,636
COD Interest		177,563		—
Other		8,613		39,143
Subtotal of increases		192,346		5,643,181
Tax benefit before valuation allowance		(962,544)		4,579,432
Change in valuation allowance		1,196,724		(4,579,432)
Net income tax expenses	$	234,180	$	—

Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss (“NOL”) carryforwards following a change of control, which occurred on June 28, 2018. As of December 31, 2019, the deferred tax assets included the expected tax benefit attributable to federal NOLs of $2,079,888. The federal NOLs generated prior to June 28, 2018 which are subject to Section 382 limitation can be carried forward. If not utilized, the NOLs of $798,236 prior to 2017 will expire through the year of 2032, and the NOLs generated from June 28, 2018 to December 31, 2019 do not expire and will carry forward indefinitely, but their utilization in any carry forward year is limited to 80% of taxable income in that year. The Company believes that it is more likely than not that the benefit from federal NOL carryforwards will not be realized; thus, we have recorded a full valuation allowance of $436,777 on the deferred tax assets related to these federal NOL carryforwards.

Loss carry forwards for tax purposes as of December 31, 2019, have expiration dates that range from 2024 through 2039.