10. INCOME TAXES

Temporary differences between the consolidated financial statement carrying amount and tax basis of assets and liabilities that give rise to significant portions of the deferred income tax asset at December 31, 2011 and 2010 are as follows:

	December 31,
	2011			2010
Loss reserve discounting	$	20,055,111		$	19,811,790
Unearned premium reserve limitation		11,989,717			11,082,443
Retirement benefits		9,862,263			4,822,987
Other policyholders' funds payable		1,771,406			2,910,513
Minimum tax credits		1,051,205			-
"Other-than-temporarily" impaired securities held		572,526			1,701,888
Other, net		1,299,889			1,051,419
Total deferred income tax asset		46,602,117			41,381,040
Net unrealized holding gains on investment securities		(27,544,260	)		(20,080,265	)
Deferred policy acquisition costs		(14,258,498	)		(13,154,557	)
Other, net		(1,549,538	)		(1,456,000	)
Total deferred income tax liability		(43,352,296	)		(34,690,822	)
Net deferred income tax asset	$	3,249,821		$	6,690,218

Based upon anticipated future taxable income and consideration of all other available evidence, management believes that it is “more likely than not” that the Company's net deferred income tax asset will be realized.

The actual income tax expense (benefit) for the years ended December 31, 2011, 2010 and 2009 differed from the “expected” income tax expense (benefit) for those years (computed by applying the United States federal corporate tax rate of 35 percent to income (loss) before income tax expense (benefit)) as follows:

	Year ended December 31,
	2011			2010			2009
Computed "expected" income tax expense (benefit)	$	(3,502,596	)	$	14,855,828		$	21,883,686
Increases (decreases) in tax resulting from:
Tax-exempt interest income		(4,636,716	)		(4,931,396	)		(5,139,443	)
Dividends received deduction		(516,691	)		(478,528	)		(485,035	)
Proration of tax-exempt interest and dividends received deduction		773,011			811,489			843,672
Elimination of deduction for Medicare Part D retiree drug subsidy		-			794,383			-
Other, net		(26,810	)		47,125			51,323
Income tax expense (benefit)	$	(7,909,802	)	$	11,098,901		$	17,154,203

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.

Comprehensive income tax expense (benefit) included in the consolidated financial statements for the years ended December 31, 2011, 2010 and 2009 is as follows:

	Year ended December 31,
	2011			2010			2009
Income tax expense (benefit) on:
Operations	$	(7,909,802	)	$	11,098,901		$	17,154,203
Change in unrealized holding gains on investment securities		7,463,995			4,658,820			14,040,789
Change in funded status of retirement benefit plans:
Pension plans		(3,132,777	)		668,041			2,183,000
Postretirement benefit plans		(2,799,278	)		(780,555	)		(1,886,738	)
Comprehensive income tax expense (benefit)	$	(6,377,862	)	$	15,645,207		$	31,491,254

The Company had no provision for uncertain tax positions at December 31, 2011 or 2010. The Company recognized $9,396 of interest income related to U.S. federal taxes during 2011. The Company did not recognize any interest expense or other penalties related to U.S. federal or state income taxes during 2011, 2010 or 2009. 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 states income tax returns. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2008.