AMERINST INSURANCE GROUP LTD

11.

TAXATION

Under current Bermuda

law, the Company and its subsidiaries are

not

required to pay taxes in Bermuda on either income or capital gains. The Company has received an undertaking from the Bermuda government that, in the event of income or capital gains taxes being imposed, the Company will be exempted from such taxes until the year

2035.

However, APSL which is a Delaware corporation domiciled in the state of Illinois is subject to taxation in the United States.

The actual income tax rate differed from the amount computed by applying the effective rate of

under Bermuda law to earnings before income taxes as shown in the following reconciliation:

	2017			2016
Earnings before income tax	$	736,993		$	1,471,323
Expected tax		—			—
Foreign taxes at local expected rates		108,200			3,209
Other		370,200			9,223
Deferred tax expense from enacted rate reductions		1,040,000			—
Change in valuation allowance		(1,518,400	)		(12,432	)
Net tax expense (benefit)	$	—		$	—

Deferred income taxes, arising from APSL, reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

United States tax laws enacted in

2017

lower tax rates beginning in

2018.

The deferred tax assets and liabilities have been reduced to reflect the newly enacted rates. As of

December

31,

2017

and

2016,

management set up full valuation allowances against the deferred tax assets as disclosed below since the success of APSL was

not

certain and therefore, it was more likely than

not

that a tax benefit would

not

be realized.

	2017			2016
Capitalized start-up expenses	$	104,000		$	163,000
Operating loss carryforwards		2,453,000			4,009,000
Unearned commission income		20,000			—
Accrued interest to parent		250,000			—
Depreciation and amortization		(27,000	)		(22,000	)
Deferred tax assets before valuation allowance		2,800,000			4,150,000
Valuation allowance		(2,800,000	)		(4,150,000	)
Deferred tax assets net of valuation allowance	$	—		$	—

December

31,

2017,

the deferred tax assets (after valuation allowance) are based on loss carryforwards of

$8,607,000,

which expire in

years.