10. INCOME TAXES
Components of income tax expense for 2017, 2016, and 2015 are as follows:
| 2017 | 2016 | 2015 | ||||||||||
| Current expense | $ | 1,101,902 | $ | 1,163,230 | $ | 900,543 | ||||||
| Deferred taxes (benefit) | 517,998 | (10,754 | ) | (73,379 | ) | |||||||
| Total income taxes | $ | 1,619,900 | $ | 1,152,476 | $ | 827,164 | ||||||
The reasons for the difference between the federal income taxes in the consolidated statements of income and the amount and percentage computed by the applying the combine statutory federal and state income tax rate to income taxes are as follows:
| 2017 | 2016 | 2015 | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Taxes at statutory income tax rate | $ | 1,845,313 | 34.0 | $ | 1,763,394 | 34.0 | $ | 1,428,272 | 34.0 | |||||||||||||||
|
Reductions in taxes resulting from exempt income |
(524,347 | ) | (9.7 | ) | (547,556 | ) | (10.6 | ) | (540,861 | ) | (12.9 | ) | ||||||||||||
| Other timing differences | 298,934 | 5.5 | (63,362 | ) | (1.2 | ) | (60,247 | ) | (1.4 | ) | ||||||||||||||
| Total income taxes | $ | 1,619,900 | 29.8 | $ | 1,152,476 | 22.2 | $ | 827,164 | 19.7 | |||||||||||||||
The sources of timing differences for tax reporting purposes and the related deferred taxes recognized in 2017, 2016, and 2015 are summarized as follows:
| 2017 | 2016 | 2015 | ||||||||||
| Nonqualified retirement plan | $ | 0 | $ | 0 | $ | (7,229 | ) | |||||
| Intangible asset amortization | 172,816 | 0 | 0 | |||||||||
| Deferred gain on covered transaction | 9,352 | 498 | (24,154 | ) | ||||||||
| Nonaccrual loan interest | (6,896 | ) | 32,157 | (34,104 | ) | |||||||
| Foreclosed assets expenses | (42,075 | ) | (3,413 | ) | (4,577 | ) | ||||||
| Bad debt expense in excess of tax | 423,203 | (31,405 | ) | 27,850 | ||||||||
| Realized impairment gain on equity securities | 0 | 0 | 13,233 | |||||||||
| Accretion of discounted bonds | 14,772 | 33,187 | 26,370 | |||||||||
| Gain on disposition of discounted bonds | (28,215 | ) | (23,059 | ) | (3,503 | ) | ||||||
| Book and tax depreciation difference | (24,959 | ) | (18,719 | ) | (67,265 | ) | ||||||
| Total deferred taxes | $ | 517,998 | $ | (10,754 | ) | $ | (73,379 | ) | ||||
ASC 740, Income Taxes, requires organizations to recognize the effect of a change in tax rates at the date of enactment by adjusting its deferred tax liabilities and assets to the new tax rate. With the Jobs and Tax Cut Act of 2017 being signed into law in December 2017, our deferred taxes were revalued resulting in additional income tax expense of $419,359 at December 31, 2017, leaving $98,639 as the actual current period timing difference.
| December 31 | ||||||||
| 2017 | 2016 | |||||||
| Deferred tax assets: | ||||||||
| Nonaccrual loan interest | $ | 8,843 | $ | 1,947 | ||||
| Deferred gain on covered transaction | 14,304 | 23,657 | ||||||
| Alternative minimum tax | 332,776 | 434,920 | ||||||
| Foreclosed assets expenses | 51,693 | 9,618 | ||||||
| Intangible asset amortization | 125,883 | 298,699 | ||||||
| Bad debt expense in excess of tax | 639,161 | 1,062,364 | ||||||
| Realized loss on other-than-temporarily impaired equity securities | 214,353 | 214,353 | ||||||
| Deferred directors compensation | 104,561 | 0 | ||||||
| Capital loss carryforward | 32,878 | 0 | ||||||
| Pension plan | 435,172 | 875,641 | ||||||
| Total deferred tax assets | 1,959,624 | 2,921,199 | ||||||
| Deferred tax liabilities: | ||||||||
| Accretion on bonds and gain on discounted bonds | 55,690 | 69,133 | ||||||
| Book and tax depreciation difference | 218,634 | 243,593 | ||||||
| Unrealized gain (loss) on securities available for sale | 1,982 | (44,416 | ) | |||||
| Total deferred tax liabilities | 276,306 | 268,310 | ||||||
| Net deferred tax assets | $ | 1,683,318 | $ | 2,652,889 | ||||