Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Taxes

15. Income Taxes:

The composition of deferred tax assets and liabilities and the related tax effects as of December 31, 2021 and 2020, are as follows (in thousands):

	2021		2020
Deferred tax liabilities:
Deferred policy acquisition costs	$	(1,431)	$	(3,746)
Net unrealized holding gain on investments		(1,781)		(1,579)
Agency relationship		(5)		(11)
Intangible assets		—		—
Goodwill		—		—
Bond amortization		—		—
Fixed assets		(927)		(1,293)
Other		(167)		(343)
Total deferred tax liabilities		(4,311)		(6,972)
Deferred tax assets:
Unearned premiums		5,796		7,639
Amortization of non-compete agreements		—		—
Intangible assets		192		308
Pension liability		683		981
Net operating loss carry-forward		124		118
Unpaid loss and loss adjustment expense		5,375		4,688
Rent reserve		3		45
Bonus accrual		312		671
Deferred social security tax		178		356
Investment impairments		217		336
Other		337		554
Total deferred tax assets		13,217		15,696
Deferred federal income taxes, net	$	8,906	$	8,724

We concluded that no valuation allowance was necessary against our deferred tax assets as of December 31, 2021 and 2020.

A reconciliation of the income tax provisions based on the applicable statutory tax rate of 21% to the provisions reflected in the consolidated financial statements for the years ended December 31, 2021 and 2020, respectively, is as follows (in thousands):

	2021		2020
Computed expected income tax expense (benefit) at statutory tax rate	$	2,414	$	(22,884)
Meals and entertainment		34		28
Tax exempt interest		(234)		(300)
Dividends received deduction		(190)		(111)
Goodwill		—		7,410
State taxes (net of federal benefit)		208		223
Rate differential on NOL		—		(3,383)
True up		—		(2,369)
Other		259		(31)
Income tax expense (benefit)	$	2,491	$	(21,417)
Current income tax expense (benefit)	$	2,297	$	(14,904)
Deferred tax expense (benefit)		194		(6,513)
Income tax expense (benefit)	$	2,491	$	(21,417)

We have available, for federal income tax purposes, unused net operating loss carryforwards of $589 thousand at December 31, 2021. The Tax Cuts and Jobs Act of 2017 (“TCJA”) generally repealed the previous two year carry-back and 20 year carry-forward provision for net operating losses and adopted an indefinite carry-forward of net operating losses arising in tax years ending after December 31, 2017. However, the TCJA preserved present law for net operating losses of property/casualty insurance companies. Thus, our net operating losses may be carried-back two years and carried-forward 20 years.

The net operating losses will expire if unused, as follows (in thousands):

Year
2022	$	—
2028		2
2029		25
2031		45
2032		77
2033		73
2034		59
2035		33
2036		50
2037		29
2038		40
2039		70
2040		60
2041		26
	$	589

We are no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years prior to 2017. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions at December 31, 2021.