Note 10. Income Taxes

The provision for income taxes consists of the following for the years ended December 31:



(in millions)	Erie Insurance Group
	2014			2013			2012
Indemnity
Current income tax expense	$	87		$	89		$	84
Deferred income tax benefit	(4		)	(5		)	(3		)
Provision for income taxes – Indemnity	83			84			81
Exchange
Current income tax expense	166			232			78
Deferred income tax expense	8			203			121
Provision for income taxes – Exchange	174			435			199
Provision for income taxes – Erie Insurance Group	$	257		$	519		$	280

The deferred income tax expense in 2013 and 2012 was primarily driven by unrealized gains on investments.

A reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rates to pre-tax income, is as follows for the years ended December 31:



(in millions)	Erie Insurance Group
	2014			2013			2012
Indemnity
Income tax at statutory rates	$	88		$	86		$	84
Other, net	(5		)	(2		)	(3		)
Provision for income taxes – Indemnity	83			84			81
Exchange
Income tax at statutory rates	202			462			230
Tax-exempt interest	(13		)	(13		)	(13		)
Dividends received deduction	(15		)	(14		)	(14		)
Other, net	0			0			(4		)
Provision for income taxes – Exchange	174			435			199
Provision for income taxes – Erie Insurance Group	$	257		$	519		$	280

Temporary differences and carry-forwards, which give rise to consolidated deferred tax assets and liabilities, are as follows for the years ended December 31:



(in millions)	Erie Insurance Group
	2014		2013
Indemnity
Deferred tax assets:
Other employee benefits	$	18	$	14
Pension and other postretirement benefits	55		24
Other	4		3
Total deferred tax assets	77		41
Deferred tax liabilities:
Unrealized gains on investments	4		3
Limited partnerships	11		11
Depreciation	17		17
Prepaid expenses	8		7
Other	0		1
Total deferred tax liabilities	40		39
Net deferred income tax asset – Indemnity	$	37	$	2



Exchange
Deferred tax assets:
Loss reserve discount	$	55		$	63
Unearned premiums	214			197
Write-downs of impaired securities	8			18
Other	25			19
Total deferred tax assets	302			297
Deferred tax liabilities:
Deferred policy acquisition costs	191			185
Unrealized gains on investments	510			489
Limited partnerships	67			61
Other	24			12
Total deferred tax liabilities	792			747
Net deferred income tax liability – Exchange	$	(490	)	$	(450	)
Net deferred income tax liability – Erie Insurance Group	$	(453	)	$	(448	)

Neither the Indemnity nor the Exchange had a valuation allowance recorded at December 31, 2014 or December 31, 2013. The IRS has examined our tax filings through tax year ended 2009 and is currently examining our federal income tax returns for 2010, 2011 and 2012.

Indemnity is the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurance exchange. In that capacity, Indemnity provides all services and facilities necessary to conduct the Exchange’s insurance business. Indemnity and the Exchange together constitute a single insurance business. Indemnity is not subject to state corporate income or franchise taxes in states where the Exchange conducts its business and the states collect premium tax in lieu of corporate income or franchise tax, as a result of the Exchange’s remittance of premium taxes in those states.