PALMETTO GBA 2010 ANNUAL REPORT

NOTE 4 INCOME TAXES
41
The Company’s operations are included in the consolidated federal income tax return of
BCBSSC. Under a written tax-sharing agreement, BCBSSC allocates the tax provision to each
company within the consolidated group based upon the company’s proportionate share of the
consolidated federal income tax liability computed on a stand-alone basis, multiplied by the
total consolidated federal income tax return liability.
The Company had income tax payables to BCBSSC of $1,870,000 and $239,000 at
December 31, 2010 and 2009, respectively, which are included in net payables to the parent.
The Company made payments to BCBSSC for income taxes of $2,072,000 and $1,321,000
during the years ended December 31, 2010 and 2009, respectively.
The Company recognized a provision for income taxes as follows (in thousands):
Year ended December 31,
2010 2009
Deferred tax assets and liabilities are classified as current and long-term based on the
classification of the related asset or liability, as follows (in thousands):
Year ended December 31,
2010 2009
Deferred tax assets:
Current $ 3,505 $ 2,116
Long-term 286 346
3,791 2,462
Deferred tax liabilities:
Current 208 218
Long-term 68 —
276 218
Net deferred tax asset $ 3,515 $ 2,244
Current $ 3,343 $ 720
Deferred (1,339) 143
Provision for income taxes /
continuing operations 2,004 863
Provision for income taxes /
discontinued operations — 193
Total income taxes incurred $ 2,004 $ 1,056
Unrealized gains on investments credited directly to equity have been reduced by deferred
income tax expense of $68,000 for the year ended December 31, 2010.
The provision for income taxes differs from the amount computed by applying the federal
statutory tax rate of 35% to income before income taxes primarily due to changes in the
tax contingency reserve, investment in subsidiaries, the dividends received deduction, and
benefits derived from filing on a consolidated basis versus separate company basis. The
temporary differences that give rise to deferred tax assets and liabilities are primarily related
to accrued expenses, fixed assets, and prepaid expenses. There was no valuation allowance
at December 31, 2010 and 2009.