Note 6 – Income Taxes

UTG and UG file separate federal income tax returns.

Income tax expense (benefit) consists of the following components:

The expense for income differed from the amounts computed by applying the applicable United States statutory rate of 35% before income taxes as a result of the following differences:

As a result of the TCJA described above in Note 1 - Summary of Significant Accounting Policies, the Company has recognized a decrease to their net deferred tax liability as of December 31, 2017 in the amount of $7,330,936. The Company has determined that no other changes are required to the deferred tax liability, and the current income tax expense is unaffected by this change in the law.

The following table summarizes the major components that comprise the deferred tax liability as reflected in the balance sheets:

At December 31, 2017 and 2016, the Company had gross deferred tax assets of $1,027,203 and $1,727,307, respectively, and gross deferred tax liabilities of $12,023,607 and $17,186,356, respectively, resulting from temporary differences primarily related to the life insurance subsidiary.  A valuation allowance is to be provided when it is more likely than not that deferred tax assets will not be realized by the Company. No valuation allowance has been recorded (except as noted below) relating to the Company's deferred tax assets since, in Management's judgment, the Company will more likely than not have sufficient taxable income in future periods to fully realize its existing deferred tax assets.

The Company also has a deferred tax asset of $118,693 and 155,930 relating to an AMT tax carryforward as of December 31, 2017 and 2016, respectively.  The Company established an allowance of $155,930 against this deferred tax asset as of December 31, 2016, based on Management's assessment of the recoverability of these deferred assets. As a result of the changes to the Alternative Minimum Tax and corresponding credits resulting from the TCJA, Management has determined that an allowance against this asset it no longer required. 

The Company's Federal income tax returns are periodically audited by the Internal Revenue Service ("IRS"). There are currently no examinations in process, nor is Management aware of any pending examination by the IRS.  The Company follows the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board ("FASB") ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently need to be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company has evaluated its tax positions, expiring statutes of limitations, changes in tax law and new authoritative rulings and believes that no disclosure relative to a provision of income taxes is necessary, at this time, to cover any uncertain tax positions. Tax years that remain subject to examination are the years ended December 31, 2014, 2015, 2016 and 2017.

The Company classifies interest and penalties on underpayment of income taxes as income tax expense.  No interest or penalties were included in the reported income taxes for the years presented.  The Company is not aware of any potential or proposed changes to any of its tax filings.