5. INCOME TAXES

The actual income tax expense (benefit) for the three months and nine months ended September 30, 2011 and 2010 differed from the “expected” income tax expense (benefit) for those periods (computed by applying the United States federal corporate tax rate of 35 percent to income (loss) before income tax expense (benefit)) as follows:

	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010

Computed "expected" income tax expense (benefit)	$	(2,802,029	)	$	3,435,758		$	(7,932,123	)	$	9,749,298
Increases (decreases) in tax resulting from:
Tax-exempt interest income		(1,076,109	)		(1,221,533	)		(3,481,381	)		(3,718,265	)
Dividends received deduction		(123,611	)		(122,858	)		(396,971	)		(344,326	)

Proration of tax-exempt interest and dividends received deduction		196,049			201,659			597,844			609,389
Elimination of deduction for Medicare
Part D retiree drug subsidy		-			-			-			794,383
Other, net		(56,013	)		64,850			(46,625	)		129,518
Income tax expense (benefit)	$	(3,861,713	)	$	2,357,876		$	(11,259,256	)	$	7,219,997

As a result of the Patient Protection and Affordable Care Act (H.R. 3590) and the follow-up Health Care and Education Reconciliation Act of 2010 (H.R. 4872) signed into law on March 23, 2010 and March 30, 2010, respectively (the “Acts”), beginning in 2013 the Company will no longer be able to claim a tax deduction for drug expenses that are reimbursed under the Medicare Part D retiree drug subsidy program. Although this tax change does not take effect until 2013, the Company was required to recognize the financial impact of this tax change in the period in which the Acts were signed. As a result of the Acts, the Company recognized a decrease in its deferred tax asset of $794,383 during the first quarter of 2010.

The Company had no provision for uncertain tax positions at September 30, 2011 or December 31, 2010. The Company did not recognize any interest or other penalties related to U.S. federal or state income taxes during the three months or nine months ended September 30, 2011 or 2010. It is the Company's accounting policy to reflect income tax penalties as other expense, and interest as interest expense.

The Company files a U.S. federal tax return, along with various state income tax returns. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2005. The Company's U.S. federal tax returns for tax years 2005 through 2008 are currently being audited. An additional tax liability of approximately $27,000 (including a small amount of interest) is expected to be due as a result of this audit.