Income Taxes

12 Months Ended

Dec. 31, 2020


NOTE 12						Income Taxes

Net deferred tax (liabilities) assets, included on the Consolidated Balance Sheet at December 31, 2020 and 2019 as a component of Other liabilities and Other assets, respectively, are as follows:


Deferred tax assets and liabilities
Table	12.1
(In thousands)		2020		2019
Total deferred tax assets		$	38,443	$	63,533
Total deferred tax liabilities		(98,485)		(57,791)
Net deferred tax (liability) asset		$	(60,042)	$	5,742

Table 12.2 includes the components of the net deferred tax (liability) asset as of December 31, 2020 and 2019.


Deferred tax components
Table	12.2
(In thousands)		2020		2019
Unearned premium reserves		$	23,163	$	30,487
Benefit plans		(13,977)		(10,790)
Loss reserves		3,542		2,175
Unrealized appreciation in investments		(72,341)		(36,822)
Mortgage investments		—		8,359
Deferred compensation		6,776		9,270
AMT credit carryforward		—		8,303
Other, net		(7,205)		(5,240)
Net deferred tax (liability) asset		$	(60,042)	$	5,742

We believe that all gross deferred tax assets at December 31, 2019 and 2020 are fully realizable and no valuation allowance has been established.

If the federal income tax rate increases, our net deferred tax liability or asset would increase. In addition, we would set up a deferred tax liability related to tax and loss bonds for the difference in the new federal income tax rate and the 21% federal income tax rate at which the tax and loss bonds were purchased.

Table 12.3 summarizes the components of the provision for (benefit from) income taxes:


Provision for (benefit from) income taxes
Table	12.3
(In thousands)		2020		2019		2018
Current Federal		$	85,574	$	162,911	$	(16,272)
Deferred Federal		28,244		11,860		185,598
Other		(648)		(557)		4,727
Provision for income taxes		$	113,170	$	174,214	$	174,053

The CARES Act provides financial relief to individuals and businesses in the form of loans, grants, and tax changes, among other types of assistance. The tax changes in the CARES Act did not materially impact our financial results.

Current federal income tax payments were$79.6 million, $158.3 million, and $12.2 million in 2020, 2019 and 2018, respectively.

At December 31, 2020 we owned $271.0 million of tax and loss bonds.

Table 12.4 reconciles the federal statutory income tax rate to our effective tax provision rate.


Effective tax rate reconciliation
Table	12.4
		2020		2019		2018
Federal statutory income tax rate		21.0	%	21.0	%	21.0	%

Additional income tax benefit related to IRS litigation		—	%	—	%	(0.3)	%
Tax exempt municipal bond interest		(0.9)	%	(0.6)	%	(0.7)	%
Other, net		0.1	%	0.1	%	0.6	%
Effective tax rate		20.2	%	20.5	%	20.6	%

The Internal Revenue Service ("IRS") completed examinations of our federal income tax returns for the years 2000 through 2007 and issued proposed assessments for taxes, interest and penalties related to our treatment of the flow-through income and loss from an investment in a portfolio of residual interests of Real Estate Mortgage Investment Conduits ("REMICs").

In 2018, we finalized an agreement with the IRS to settle all issues in the examinations and related U.S. Tax Court case. As a result of our settlement, we made federal tax and interest payments of $14.8 million during 2018. We also made state tax and interest payments of $36.8 million during 2018. The impact of the agreed upon settlement was previously reflected in our consolidated statements of operations.

We have not recorded any uncertain tax positions during 2019 and 2020 and have no unrecognized tax benefits at December 31, 2019 and December 31, 2020. We recognize interest accrued and penalties related to unrecognized tax benefits in income taxes. The statute of limitations related to the consolidated federal income tax return is closed for all years prior to 2016.