13. INCOME TAXES

        Allocation of income taxes between current and deferred portions is as follows:

                                                                                                                                                                                    

 

        The reasons for the differences between the statutory federal income tax expense and the actual tax expense are summarized as follows:

                                                                                                                                                                                    

 

        The Tax Cuts and Tax Act (the "Tax Act") was signed into law in December 2017 which reduced the corporate federal statutory tax rate from 34% to 21%. U.S. GAAP requires the impact of the Tax Act to be accounted for in the period of enactment. As such, the Corporation was required to write down the value of its net deferred tax assets by $412,000 as of December 31, 2017 to reflect the reduction in the corporate tax rate for future periods. On December 22, 2017, the U.S. Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin No. 118 ("SAB 118") to address any uncertainty or diversity of views in practice in accounting for the income tax effects of the Tax Act in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete this accounting in the reporting period that includes the enactment date. SAB 118 allows for a measurement period, not to extend beyond one year from the Tax Act's enactment date, to complete the necessary accounting.

        The Corporation recorded provisional amounts of deferred income taxes using reasonable estimates in three areas where the information necessary to determine the final deferred tax asset or liability was either not available, not prepared, or not sufficiently analyzed as of the report filing date: 1) the deferred tax liability for temporary differences between the tax and financial reporting bases of fixed assets is awaiting completion and implementation of software updates to process the calculations associated with the Tax Act's provisions allowing for 100% bonus depreciation on fixed assets placed in service after September 27, 2017; 2) the deferred tax asset for temporary differences associated with accrued compensation is awaiting final determinations of amounts that will be paid on or before March 15, 2018 and deducted on the 2017 income tax returns; and 3) the deferred tax liability for temporary differences associated with prepaid expenditures is awaiting system information needed to fully complete the analysis of qualified amounts.

        No adjustments were made to deferred tax assets representing future deductions for accrued compensation that may be subject to new limitations under Internal Revenue Code Section 162(m) which, generally, limits the annual deduction for certain compensation paid to certain employees to $1 million. As of the report filing date, there is uncertainty regarding how the newly-enacted rules in this area apply to existing contracts. Consequently, the Corporation is seeking further clarification of these matters before completing its analysis.

        The Corporation will complete and record the income tax effects of these provisional items during the period the necessary information becomes available. This measurement period will not extend beyond December 22, 2018.

        The tax effects of each item that give rise to deferred taxes are as follows:

                                                                                                                                                                                    

 

        A summary of the change in deferred taxes is as follows:

 

                                                                                                                                                                                                                     

 

        The Bank has a net deferred tax asset of $52,000 relating to charitable contribution carry forwards that must be utilized by the income tax year ending December 31, 2019. Charitable contributions are generally limited to a ten percent of taxable income deduction. At December 31, 2017 and 2016, the Bank has no ASC 740-10 unrecognized tax benefits. The Bank does not expect the total amount of the unrecognized tax benefits to significantly increase within the next twelve months. The Bank's income tax returns are subject to review and examination by federal and state taxing authorities. The Bank is subject to U.S. federal income tax as well as income tax in various state taxing jurisdictions. The Bank is no longer subject to examination by federal and state taxing authorities for years prior to the year ended December 31, 2014.