Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

Note 8. Income Taxes

Total income taxes were allocated as follows:

	2023			2022
Total tax expense (benefit) on income	$	(394	)	$	571
Tax expense (benefit) on components of shareholders’ equity:
Net unrealized income (losses) on investment securities		1,602			(10,589	)
Total tax expense (benefit)	$	1,208		$	(10,018	)

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

	2023			2022
Federal income tax provision at the statutory rate	$	(119	)	$	440
Statutory rate		21	%		21	%
Dividends-received deduction		(24	)		(24	)
Meals and entertainment		15			61
Vested stock and club dues		16			14
Parking disallowance		17			17
Penalties and fines		—			149
Adjustment for prior years’ estimates to actual		(299	)		(86	)
Income tax expense (benefit)	$	(394	)	$	571
Effective tax rate		69.7	%		27.2	%

The primary difference between the effective tax rate and the federal statutory income tax rate for 2023 resulted from the adjustment for prior years’ estimates to actual of $299 in the year ended December 31, 2023, which included the return to provision adjustment that is generally updated at the completion of the third quarter of each fiscal year and an adjustment for partnership valuation. Also contributing to the differences between the effective tax rate and the federal statutory income tax rate was a permanent difference related to meals and entertainment.

The primary differences between the effective tax rate and the federal statutory income tax rate for 2022 resulted from a permanent difference related to penalties and fines incurred of $149.  Also contributing to differences between the effective tax rate and the federal statutory income tax rate were the adjustment for prior years’ estimates to actual that are generally updated at the completion of the third quarter of each fiscal year and were $86 in the year ended December 31, 2022. Other contributing factors to the differences between the effective tax rate and the federal statutory income tax rate were permanent differences related to meals and entertainment and 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.

Deferred tax assets and liabilities at December 31, 2023 and 2022 were comprised of the following:

	2023			2022
Deferred tax assets:
Deferred acquisition costs	$	8,808		$	7,953
Net unrealized investment losses		3,342			4,489
Insurance reserves		2,898			1,597
Impaired assets		791			791
Bad debts and other		337			252
Net operating loss		559			—
Total deferred tax assets		16,735			15,082
Deferred tax liabilities:
Deferred and uncollected premiums	$	(1,053	)	$	(835	)
Net unrealized investment gains		—			—
Other		—			(84	)
Total deferred tax liabilities		(1,053	)		(919	)
Net deferred tax asset	$	15,682		$	14,163

The components of income tax expense (benefit) were:

	2023			2022
Current – Federal	$	2,727		$	2,390
Deferred – Federal		(3,121	)		(1,819	)
Total	$	(394	)	$	571

The Company has formal tax-sharing agreements, and files a consolidated income tax return, with its subsidiaries. Tax years 2020, 2021 and 2022 are considered open tax years that remain subject to examination by the Internal Revenue Service.