Income Tax Disclosure [Text Block]

12 Months Ended

Dec. 31, 2018

Notes

Income Tax Disclosure

Note 11.Income Taxes 

IHC and its subsidiaries file a consolidated Federal income tax return on a June 30 fiscal year.

The provision for income tax expense (benefit) attributable to income from continuing operations, as shown in the Consolidated Statements of Income, is as follows for the years indicated (in thousands):

		2018		2017
CURRENT:
U.S. Federal	$	3,897	$	(4,077)
State and Local		528		29
		4,425		(4,048)
DEFERRED:
U.S. Federal		4,077		(9,780)
State and Local		(14)		34
		4,063		(9,746)
	$	8,488	$	(13,794)

Taxes computed at the Federal statutory rates of 21% and 35% attributable to pretax income for the years ended December 31, 2018 and 2017, respectively, are reconciled to the Company's actual income tax expense (benefit) as follows for the years indicated (in thousands):

		2018		2017
Tax computed at the statutory rate	$	7,884	$	9,918
Dividends received deduction and tax
exempt interest		(187)		(423)
State and local income taxes, net of Federal effect		406		42
Subsidiary stock basis write-off		-		(11,589)
Health insurer compensation limit		665		192
Impact of enacted tax reform		1,190		9,402
AMIC valuation allowance adjustment		-		(20,261)
Sharebased compensation		(844)		(867)
Other, net		(626)		(208)
Income tax expense (benefit)	$	8,488	$	(13,794)

In 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to reducing the Federal corporate income tax rate from 35% to 21%. We are required to recognize the income tax effect of a change in tax rates in the period the tax rate change is enacted. As the result of IHC’s June 30 fiscal tax year, the Tax Act subjected IHC to a blended tax rate of 28% for its fiscal tax year ended June 30, 2018 causing a difference of $1,190,000 in expected tax expense (calculated using a statutory rate of 21%) for the calendar year ended December 31, 2018. For the year ended December 31, 2017, there was no impact of the Tax Act’s blended tax rate on current income tax expense due to IHC’s NOL carryforward position at December 31, 2017. The Company did however record a one-time, non-cash charge to deferred income tax expense of $9,402,000 for the year ended December 31, 2017 as a result of the change in the enacted statutory tax rate.

As a result of the winding down of operations and dissolution of IHC Administrative Services, Inc. (“IHC AS”), a subsidiary of IHC, in 2017, the Company recognized an estimated $11,589,000 income tax benefit on a worthless stock deduction of $33,110,000 representing the Company’s tax basis in its unrecovered investment in IHC AS.

Temporary differences between the Consolidated Financial Statement carrying amounts and tax bases of assets and liabilities that give rise to the deferred tax assets and liabilities at December 31, 2018 and 2017 are summarized below (in thousands). The net deferred tax asset or liability is included in Other Assets or Other Liabilities, as appropriate, in the Consolidated Balance Sheets. IHC and its subsidiaries, excluding AMIC and its subsidiaries, considered the reversal of deferred tax liabilities and projected future taxable income in determining that a valuation allowance was not necessary on their deferred tax assets at December 31, 2018 or 2017. The net deferred tax asset relative to AMIC and its subsidiaries included in other assets on IHC’s Consolidated Balance Sheets at December 31, 2018 and 2017 was $14,191,000 and $18,602,000, respectively.

		2018		2017
DEFERRED TAX ASSETS:
Unrealized losses on investment securities	$	2,210	$	1,222
Investment write-downs		48		48
Loss carryforwards		25,708		30,928
Other		2,005		1,938
Total gross deferred tax assets		29,971		34,136
Less AMIC valuation allowance		(9,394)		(9,394)
Net deferred tax assets		20,577		24,742
DEFERRED TAX LIABILITIES:
Deferred insurance policy acquisition costs		(56)		(105)
Insurance reserves		(2,801)		(3,252)
Goodwill and intangible assets		(3,583)		(4,115)
Other		(1,508)		(1,625)
Total gross deferred tax liabilities		(7,948)		(9,097)
Net deferred tax asset	$	12,629	$	15,645

Interest expense and penalties for the years ended December 31, 2018 and 2017 are insignificant. Tax years ending June 30, 2015 and forward are subject to examination by the Internal Revenue Service.

The Company’s 2015 consolidated income tax return was selected for examination by the Internal Revenue Service.

Net cash payments (receipts) for income taxes were $1,303,000 and $397,000 in 2018 and 2017, respectively.