Note 11 Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes

Income Tax Disclosure [Text Block]

Note 11.          Income Taxes

The provision for income taxes shown in the Condensed Consolidated Statements of Operations was computed based on the Company's actual results which approximate the effective tax rate expected to be applicable for the balance of the current fiscal year in accordance with consolidated life/non-life group income tax regulations. Such regulations adopt a subgroup method in determining consolidated taxable income, whereby taxable income is determined separately for the life insurance company group and the non-life insurance company group.

The deferred income tax expense for the three months ended March 31, 2012 allocated to stockholders' equity (principally for net unrealized gains on investment securities) was $286,000, representing the increase in the related deferred tax liability from $3,768,000 at December 31, 2011 to 4,054,000 at March 31, 2012.

Included in the $1,900,000 benefit for income taxes recorded for the three months ended March 31, 2011 is a deferred income tax benefit of $2,319,000 associated with IHC’s investment in AMIC. As the result of management’s intention to adopt tax planning strategies to recover IHC’s investment in AMIC in a tax-free manner, the cumulative Federal and State deferred income tax liabilities established as of December 31, 2010 for temporary differences between IHC’s book value and tax basis in AMIC became permanent. Accordingly, IHC released its previously recorded deferred income tax liabilities and will not record deferred income taxes in future periods for any earnings or stockholders’ equity adjustments relating to IHC’s investment in AMIC.

At March 31, 2012, AMIC, had net operating loss carryforwards of approximately $273,600,000 for federal income tax purposes which expire between 2019 and 2029. The net deferred tax asset relative to AMIC included in other assets on IHC’s Condensed Consolidated Balance Sheets at March 31, 2012 and December 31, 2011 was $7,478,000 and $8,030,000, respectively. AMIC continues to file its own separate income tax return and is not included in the consolidated tax return of IHC.