NI Holdings, Inc. Income Taxes Disclosure
| 14. | Income Taxes |
The sources of income for purposes of income tax expense (benefit) including both continuing and discontinued operations were as follows:
| Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Income (loss) before income taxes | ||||||||||||
| Domestic | $ | (12,329 | ) | $ | (9,056 | ) | $ | (4,263 | ) | |||
| Foreign | ||||||||||||
| Total income (loss) before income taxes | $ | (12,329 | ) | $ | (9,056 | ) | $ | (4,263 | ) | |||
The components of our provision for income tax expense (benefit) including both continuing and discontinued operations were as follows:
| Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Current income tax expense (benefit) | ||||||||||||
| Federal | $ | (483 | ) | $ | (4,682 | ) | $ | 2,567 | ||||
| State | (68 | ) | 215 | 278 | ||||||||
| Total current | (551 | ) | (4,467 | ) | 2,845 | |||||||
| Deferred income tax expense (benefit) | (1,365 | ) | 1,275 | (1,882 | ) | |||||||
| Total income tax expense (benefit) | $ | (1,916 | ) | $ | (3,192 | ) | $ | 963 | ||||
The following table presents a reconciliation of the and our effective tax rate including both continuing and discontinued operations:
| Year Ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| U.S federal statutory tax rate | $ | (2,589 | ) | 21.0% | $ | (1,902 | ) | 21.0% | $ | (895 | ) | 21.0% | ||||||||||||
| State and local income taxes, net of federal benefit(1) | (54 | ) | 0.4% | 277 | (3.1% | ) | 90 | (2.1% | ) | |||||||||||||||
| Tax credits | ||||||||||||||||||||||||
| Research and Development tax credit | (59 | ) | 1.4% | |||||||||||||||||||||
| Changes in valuation allowance | 2,035 | (22.5% | ) | (171 | ) | 4.0% | ||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||
| Tax-exempt interest | (142 | ) | 1.2% | (130 | ) | 1.4% | (204 | ) | 4.8% | |||||||||||||||
| Dividends received deduction | (95 | ) | 0.8% | (104 | ) | 1.2% | (118 | ) | 2.8% | |||||||||||||||
| Section 832(b)(5)(B) | 24 | (0.2% | ) | 26 | (0.3% | ) | 77 | (1.8% | ) | |||||||||||||||
| Executive compensation | 582 | (4.7% | ) | 892 | (9.8% | ) | 27 | (0.7% | ) | |||||||||||||||
| Meals and entertainment | 46 | (0.4% | ) | 38 | (0.4% | ) | 47 | (1.1% | ) | |||||||||||||||
| COLI | (42 | ) | 0.3% | (38 | ) | 0.4% | 27 | (0.7% | ) | |||||||||||||||
| Sale of Westminster | (2,661 | ) | 29.4% | 1,419 | (33.3% | ) | ||||||||||||||||||
| Prior-period adjustments | 480 | (3.9% | ) | 8 | (0.1% | ) | 627 | (14.7% | ) | |||||||||||||||
| Impact of tax rate change | 149 | (1.2% | ) | (14 | ) | 0.2% | ||||||||||||||||||
| Demutualization of BCIC | 793 | (8.8% | ) | |||||||||||||||||||||
| Other | (275 | ) | 2.2% | (2,412 | ) | 26.6% | 96 | (2.2% | ) | |||||||||||||||
| Effective tax rate | $ | (1,916 | ) | 15.5% | (3,192 | ) | 35.2% | 963 | (22.6% | ) | ||||||||||||||
(1) State taxes in Illinois made up the majority (greater than 50 percent) of the tax effect in this category.
The following table presents additional supplemental cash flow information:
| Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Income tax paid | ||||||||||||
| Federal | $ | 3,796 | $ | 2,413 | $ | (11,102 | ) | |||||
| State(1) | 125 | 440 | ||||||||||
| Foreign | ||||||||||||
| Total income taxes paid | $ | 3,921 | $ | 2,853 | $ | (11,102 | ) | |||||
(1) State taxes paid in Illinois made up the entirety of this balance.
We re-measure existing deferred income tax assets (including loss carryforwards) and liabilities when a change in tax rate occurs and record an offset for the net amount of the change as a component of income tax expense (benefit) from continuing operations in the period of enactment. We record any change to a previously recorded valuation allowance as a result of re-measuring existing temporary differences and loss carryforwards as a component of income tax expense (benefit) from continuing operations. The valuation allowance against certain deferred income tax assets was $2,345, $2,506, and $505 at December 31, 2025, 2024, and 2023, respectively.
The income tax effects of temporary differences that give rise to significant portions of our deferred income tax assets and deferred income tax liabilities including both continuing and discontinued operations at December 31, 2025 and 2024, were as follows:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred income tax assets: | ||||||||
| Unearned premium | $ | 4,473 | $ | 5,749 | ||||
| Unpaid losses and loss adjustment expenses | 1,240 | 1,286 | ||||||
| Net unrealized losses on investments | 2,181 | 4,762 | ||||||
| Loss carryovers | 3,150 | 2,506 | ||||||
| Deferred compensation | 666 | 603 | ||||||
| Stock based compensation | 679 | 355 | ||||||
| Other | 291 | 685 | ||||||
| Total deferred income tax assets | 12,680 | 15,946 | ||||||
| Deferred income tax liabilities: | ||||||||
| Deferred policy acquisition costs | 4,034 | 5,976 | ||||||
| Other | 156 | 140 | ||||||
| Total deferred income tax liabilities | 4,190 | 6,116 | ||||||
| Net deferred income tax asset | 8,490 | 9,830 | ||||||
| Valuation allowance | (2,345 | ) | (2,506 | ) | ||||
| Deferred income tax asset, net | $ | 6,145 | $ | 7,324 | ||||
At December 31, 2025 and 2024, we had unrecognized tax benefits, accrued interest and penalties, and no significant uncertain tax positions. interest and penalties on uncertain tax positions were recognized during the years ended December 31, 2025, 2024, or 2023.
At December 31, 2025 and 2024, the Company had income tax related carryforwards for alternative minimum tax credits or capital losses.
At December 31, 2025 and 2024, the Company had $2,345 and $2,506 in state net operating loss deferred tax assets, respectively, all of which are offset by a valuation allowance due to the Company’s judgment that it is more likely than not that it will be unable to realize the benefits.
Battle Creek, which was required to file its federal income tax returns on a stand-alone basis until the demutualization on January 2, 2024, had net operating loss carryforwards of $3,756 at December 31, 2023. Subsequent to the demutualization, Battle Creek will be included in the NI Holdings consolidated tax return. As a result of the demutualization, the Battle Creek net operating loss
carryforwards were written off in 2024 as they will not be available to offset income within the NI Holdings consolidated tax return, and the $505 associated valuation allowance was no longer necessary.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 6, 2026 | Showing above |
| 2024 | Mar 7, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 8, 2023 | |
| 2021 | Mar 9, 2022 | |
| 2020 | Mar 10, 2021 | |
| 2019 | Mar 11, 2020 | |
| 2018 | Mar 13, 2019 | |
| 2017 | Mar 7, 2018 | |
| 2016 | Apr 7, 2017 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.