8) Income Taxes
The Company’s income tax liability (benefit) is summarized as follows:
| December 31 | |||
| 2016 (As Restated) | 2015 (As Restated) | ||
| Current | $ (1,511,762) | $ (215,366) | |
| Deferred | 25,830,631 | 20,628,255 | |
| Total | $ 24,318,869 | $ 20,412,889 | |
Significant components of the Company’s deferred tax (assets) and liabilities are approximately as follows:
| December 31 | |||
| 2016 (As Restated) | 2015 (As Restated) | ||
| Assets | |||
| Future policy benefits | $ (9,719,058) | $ (7,551,336) | |
| Loan loss reserve | (288,590) | (1,163,700) | |
| Unearned premium | (1,519,722) | (1,610,684) | |
| Available for sale securities | (51,266) | (150,984) | |
| Net operating loss | (1,531,160) | (588,537) | |
| Deferred compensation | (2,225,208) | (1,994,927) | |
| Deposit obligations | (1,033,580) | (1,026,984) | |
| Other | (3,384,144) | (3,694,959) | |
| Less: Valuation allowance | 431,802 | - | |
| Total deferred tax assets | (19,320,926) | (17,782,111) | |
| Liabilities | |||
| Deferred policy acquisition costs | 18,150,517 | 14,838,604 | |
| Basis difference in property and equipment | 10,749,036 | 9,375,146 | |
| Value of business acquired | 2,573,902 | 2,972,883 | |
| Deferred gains | 9,290,123 | 6,902,888 | |
| Trusts | 1,599,657 | 1,599,657 | |
| Tax on unrealized appreciation | 2,788,322 | 2,721,188 | |
| Total deferred tax liabilities | 45,151,557 | 38,410,366 | |
| Net deferred tax liability | $ 25,830,631 | $ 20,628,255 | |
The valuation allowance relates to differences between recorded deferred tax assets and liabilities and ultimate anticipated realization. For the year ended December 31, 2016, the Company recorded a valuation allowance of $431,802 that relates to the acquisition of First Guaranty Insurance Company that was completed on July 11, 2016.
The Company paid $2,667,918, $2,716,161 and $408,939 in income taxes for the years ended December 31, 2016, 2015 and 2014, respectively.
The Company’s income tax expense (benefit) is summarized as follows for the years ended December 31:
| 2016 (As Restated) | 2015 (As Restated) | 2014 (As Restated) | ||||
| Current | ||||||
| Federal | $ 1,138,196 | $ 2,423,846 | $ 1,532,539 | |||
| State | 245,764 | 412,175 | 121,124 | |||
|
| 1,383,960 | 2,836,021 | 1,653,663 | |||
| Deferred | ||||||
| Federal | 5,686,651 | 4,413,336 | 3,406,545 | |||
| State | 443,993 | 412,674 | 449,911 | |||
|
| 6,130,644 | 4,826,010 | 3,856,456 | |||
| Total |
| $ 7,514,604 |
| $ 7,662,031 |
| $ 5,510,119 |
The reconciliation of income tax expense at the U.S. federal statutory rates is as follows:
| 2016 (As Restated) | 2015 (As Restated) | 2014 (As Restated) | ||||
| Computed expense at statutory rate | $ 6,699,099 | $ 7,144,580 | $ 4,667,165 | |||
| State tax expense, net of federal tax benefit | 455,240 | 544,400 | 376,883 | |||
| Change in valuation allowance | 431,802 | - | - | |||
| Other, net | (71,537) | (26,949) | 466,071 | |||
| Tax expense | $ 7,514,604 | $ 7,662,031 | $ 5,510,119 |
At December 31, 2016, the Company had no significant unrecognized tax benefits. As of December 31, 2016, the Company does not expect any material changes to the estimated amount of unrecognized tax benefits in the next twelve months. Federal and state income tax returns for 2013 through 2016 are subject to examination by taxing authorities.