Income Taxes

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



(in thousands)
	2018			2017		2016
Current income tax expense	$	84,454		$	81,689	$	109,727
Deferred income tax (benefit) expense	(1,358		)	26,912		(2		)
Other income tax expense	—			10,095		—
Income tax expense	$	83,096		$	118,696	$	109,725

Other income tax expense for 2017 was impacted by the re-measurement of our deferred tax assets and liabilities due to the enactment of the Tax Cuts and Jobs Act ("TCJA") on December 22, 2017, which reduced the corporate tax rate from 35% to 21% effective January 1, 2018. The current and deferred income tax (benefit) expense for 2018 is measured at the statutory rate of 21% and 35% for 2017 and 2016.

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



(in thousands)
	2018			2017			2016
Income tax at statutory rate	$	77,977		$	110,493		$	112,032
Change in tax rate ⁽¹⁾	—			10,095			—
Tax-exempt interest	(1,305		)	(2,278		)	(2,270		)
Unrecognized tax benefits	3,088			—			—
Other, net	3,336			386			(37		)
Income tax expense	$	83,096		$	118,696		$	109,725


(1)	The change in tax rate represents the tax effect of the re-measurement of deferred tax assets and liabilities due to the enactment of the TCJA.

The statutory rate for the year ended December 31, 2018 is 21% and 35% for the years ended December 31, 2017 and 2016.

At December 31, 2017, we recorded provisional amounts for certain enactment-date effects of the TCJA based on information available at that time. The Securities and Exchange Commission issued rules that allowed for a measurement period of one year after the enactment date of the TCJA to finalize the recording of the related tax impact. We completed our analysis for the effects of the TCJA and there were no material changes made in 2018 to the provisional amounts and no material impact on the effective tax rate.

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



(in thousands)
	2018		2017
Deferred tax assets:
Other employee benefits	$	12,237	$	14,092
Pension and other postretirement benefits	20,124		22,758
Allowance for management fee returned on cancelled policies	3,292		3,024
Deferred revenue	3,524		0
Unrealized losses on investments	2,030		0
Other	1,246		812
Total deferred tax assets	42,453		40,686
Deferred tax liabilities:
Depreciation	13,015		10,204
Prepaid expenses	1,376		5,568
Commissions	1,270		0
Limited partnerships	2,534		4,509
Unrealized gains on investments	0		856
Other	157		159
Total deferred tax liabilities	18,352		21,296
Net deferred tax asset	$	24,101	$	19,390

If we determine that any of our deferred tax assets will not result in future tax benefits, a valuation allowance must be established for the portion of the assets that are not expected to be realized. We had no valuation allowance recorded at December 31, 2018 or December 31, 2017.

A reconciliation of unrecognized tax benefits for the years ended December 31 is as follows:



(in thousands)
	2018			2017			2016
Balance at the beginning of the year	$	0		$	—		$	—
Additions for current year tax positions	7,719			—			—
Reductions for current year tax positions	(4,631		)	—			—
Additions for prior year tax positions	—			2,337			—
Reductions for prior year tax positions	—			(2,337		)	—
Balance at the end of the year	$	3,088		$	0		$	—

Included in the balance at December 31, 2018 was $3.1 million of tax expense related to uncertain tax positions for which the ultimate deductibility is certain, but for which there is uncertainty around the timing of deductibility. The amounts recorded in 2018 resulted from the difference in measuring the tax liability at the previous tax rate and the current enacted tax rate. This increased our effective tax rate by 0.8% in 2018. In 2017, we had an uncertain tax position of $2.3 million, for which a current liability was recorded. As a related temporary tax difference was also recognized, there was no impact to our results of operations or financial position. It is not expected that there will be a significant change in the unrecognized tax benefits in the next 12 months. Interest expense related to uncertain tax positions is recognized in income tax expense. Interest expense was $0.8 million and $0.1 million in 2018 and 2017, respectively. There was no interest expense related to uncertain tax positions in 2016.

Tax years ending December 31, 2017, 2016 and 2015 remain open to IRS examination. We are not currently under IRS audit, nor have we been notified of an upcoming IRS audit.

We are the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurance exchange. In that capacity, we provide all services and facilities necessary to conduct the Exchange's insurance business. Indemnity and the Exchange together constitute a single insurance business. Consequently, we are 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.