15. INCOME TAXES

The components of income tax (benefit) expense for the two years ended December 31 were:


(Dollars in thousands)	Years Ended December 31,
	2019		2018
Current tax expense (benefit)	$	768	$	(563)
Deferred tax expense (benefit)		(782)		(96)
Total tax expense (benefit)	$	(14)	$	(659)

Federal credits are available for ten years for Juniata’s investment in two low income housing projects. Tax credits associated with phase I will continue through 2023. Phase II credits were initiated in the second half of 2017 and will run through 2027. The tax credits are included in the tax expense line item on the Consolidated Statements of Income. Amortization of the investments using the cost method is scheduled to occur over the same period as tax credits are earned. Juniata’s maximum exposure to loss is limited to the carrying value of the investment at year-end.

The total tax benefit during the year ended December 31, 2019 was $14,000 compared to a total tax benefit of $659,000 during the year ended December 31, 2018. The greater tax benefit in 2018 was mainly due to the removal of a $406,000 deferred tax liability related to the previous 39.16% ownership in Liverpool.

A reconciliation of the statutory income tax (benefit) expense computed at 21% to the income tax expense included in the consolidated statements of income follows:


(Dollars in thousands)	Years Ended December 31,
	2019			2018
Income before income taxes	$	5,821		$	5,245
Statutory tax rate		21	%		21	%
Federal tax at statutory rate		1,222			1,101
Tax-exempt interest		(261)			(271)
Net earnings on BOLI		(49)			(50)
Dividend from unconsolidated subsidiary		—			(10)
Stock-based compensation		(12)			19
Federal tax credits		(902)			(901)
Merger and acquisition expenses		—			33
Defined benefit prior year contribution, net of other PTR adjustments		—			(198)
Basis difference related to Liverpool investment prior to acquisition		—			(406)
Other permanent differences		(12)			24
Total tax expense (benefit)	$	(14)		$	(659)
Effective tax rate		(0.2)	%		(12.6)	%

Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for the Company as of December 31, 2019 and 2018. The components giving rise to the net deferred tax asset are detailed below:


(Dollars in thousands)	Years Ended December 31,
	2019		2018
Deferred Tax Assets:
Allowance for loan losses	$	634	$	494
Deferred directors’ compensation		337		345
Employee and director benefits		288		309
Qualified pension liability		—		78
Unrealized losses on debt securities available for sale		—		655
Unrealized loss from securities impairment		—		34
Stock-based compensation		40		—
Investment in low income housing project		211		142
Fair value adjustments to acquired assets and liabilities		251		293
Tax credit carryforward		191		225
Net operating loss carryforward		29		—
Lease liability		98		—
Other		—		2
Total deferred tax assets		2,079		2,577

Deferred Tax Liabilities:
Depreciation		(197)		(445)
Right of use asset		(97)		—
Loan origination fees and costs		(418)		(384)
Prepaid expenses		(52)		(229)
Unrealized gains on debt securities available for sale		(136)		—
Unrealized gain from securities impairment		(54)		—
Annuity earnings		(60)		(56)
Fair value of mortgage servicing rights		(38)		(42)
Intangible assets		(56)		(68)
Goodwill		(382)		(353)
Total deferred tax liabilities		(1,490)		(1,577)
Net deferred tax asset included in other assets	$	589	$	1,000

The Company has concluded that the deferred tax assets are realizable (on a more likely than not basis) through the combination of future reversals of existing taxable temporary differences, certain tax planning strategies and expected future taxable income.

It is the Company’s policy to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. No significant income tax uncertainties were identified as a result of the Company’s evaluation of its income tax position. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2019 and 2018. The Company is no longer subject to examination by taxing authorities for years before 2016. Tax years 2016 through the present, with limited exception, remain open to examination.