Note 8.

Income Taxes

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and income tax expense (benefit) is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Federal income tax provision at statutory rate of 35%	$	221		$	110		$	864		$	717
Dividends-received deduction		(23	)		(25	)		(71	)		(71	)
Small life insurance company deduction		(313	)		-			(343	)		-
Other permanent differences		18			12			52			45
Adjustment for prior years’ estimates to actual		(19	)		71			(19	)		71
Income tax expense (benefit)	$	(116	)	$	168		$	483		$	762

The components of income tax expense (benefit) were:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Current - Federal	$	(157	)	$	11	$	906		$	601
Deferred - Federal		41			157		(423	)		161
Total	$	(116	)	$	168	$	483		$	762

The primary differences between the effective tax rate and the federal statutory income tax rate for the three month and nine month periods ended September 30, 2017 resulted from the dividends-received deduction (“DRD”) and the small life insurance company deduction (“SLD”). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company’s taxable income. The SLD varies in amount and is determined at a rate of 60 percent of the tentative life insurance company taxable income (“LICTI”). The SLD for any taxable year is reduced (but not below zero) by 15 percent of the tentative LICTI for such taxable year as it exceeds $3,000 and is ultimately phased out at $15,000.

The primary differences between the effective tax rate and the federal statutory income tax rate for the three month and nine month periods ended September 30, 2016 resulted from provision-to-filed return adjustments, as described below, and the DRD.

The provision-to-filed return adjustments are generally updated at the completion of the third quarter of each fiscal year and were $19 and $71 in the three month and nine month periods ended September 30, 2017 and 2016, respectively.