Note 7. Income Taxes

Total income taxes were allocated as follows:

	2019			2018
Total tax benefit on income	$	(21	)	$	(267	)

Tax benefit on components of shareholders’ equity:
Net unrealized gains (losses) on investment securities		(4,783	)		(2,541	)
Total tax benefit	$	(4,804	)	$	(2,808	)

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

	2019			2018
Federal income tax provision	$	(86	)	$	(204	)
Statutory rate		21	%		21	%

Dividends-received deduction		(23	)		(39	)
Meals & entertainment		55			56
Vested stock & club dues		37			19
Parking disallowance		17			-
Adjustment for prior years’ estimates to actual		(21	)		(99	)
Income tax benefit	$	(21	)	$	(267	)
Effective tax rate		5.2	%		27.5	%

The primary differences between the effective tax rate and the federal statutory income tax rate for 2019 resulted from permanent differences related to meals & entertainment and vested stock grants. Also contributing to differences between the effective tax rate and the federal statutory income tax rate was the dividends-received deduction (“DRD”). 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 primary differences between the effective tax rate and the federal statutory income tax rate for 2018 resulted from provision-to-filed return adjustments that are generally updated at the completion of the third quarter of each fiscal year and were $99 in the year ended December 31, 2018.

Deferred tax liabilities and assets at December 31, 2019 and 2018 were comprised of the following:

	2019			2018
Deferred tax assets:
Deferred acquisition costs	$	2,540		$	175
Insurance reserves		3,323			3,410
Impaired assets		822			1,142
Bad debts and other		319			332
Total deferred tax assets		7,004			5,059
Deferred tax liabilities:
Deferred and uncollected premiums	$	(328	)	$	(360	)
Net unrealized investment gains		(6,090	)		(148	)
Other		(272	)		(367	)
Total deferred tax liabilities		(6,690	)		(875	)
Net deferred tax asset	$	314		$	4,184

The components of income tax expense (benefit) were:

	2019			2018
Current - Federal	$	892		$	1,969
Deferred - Federal		(913	)		(2,236	)
Total	$	(21	)	$	(267	)

The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years prior to 2016 have been audited by the Internal Revenue Service and are closed.