Mercury Insurance 2008 Annual Report Download - page 81

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71
In October 2007, the Company completed the acquisition of a 4.25 acre parcel of land in Brea, California. In conjunction
with the purchase, the Company entered into an 18-month lease agreement with the seller allowing the seller to use the property
during the lease term. Also, as part of the acquisition, the Company issued a secured promissory note in the amount of $4,500,000
without interest. In December 2008, the note was paid in full and the lease agreement with the seller was terminated. The
Company has taken possession of the property at December 31, 2008.
The aggregated maturities for notes payable are as follows:
Year Maturity
2009 -$
2010 -$
2011 125,000,000$
2012 120,000,000$
2013 18,000,000$
(6) Income Taxes
Income tax provision
The Company and its subsidiaries file a consolidated federal income tax return. The provision for income tax (benefit)
expense consists of the following components:
2008 2007 2006
Federal
Current 14,090$ 82,016$ 80,069$
Deferred (196,902) (7,844) (7,169)
(182,812)$ 74,172$ 72,900$
State
Current (22,000)$ 1,994$ 23,039$
Deferred (3,930) 1,038 1,653
(25,930)$ 3,032$ 24,692$
Total
Current (7,910)$ 84,010$ 103,108$
Deferred (200,832) (6,806) (5,516)
Total (208,742)$ 77,204$ 97,592$
Year ended December 31,
(Amounts in thousands)
The income tax provision reflected in the consolidated statements of operations is reconciled to the federal income tax on
(loss) income before income taxes based on a statutory rate of 35% as shown in the table below:
2008 2007 2006
Computed tax (benefit) expense at 35% (157,801)$ 110,263$ 109,343$
Tax-exempt interest income (38,902) (38,254) (33,325)
Dividends received deduction (1,966) (2,087) (1,902)
Reduction of losses incurred deduction 6,106 6,014 5,245
State tax, penalty and interest (refund) assessment (17,511) - 16,144
State tax expense (830) 1,989 2,679
Other, net 2,162 (721) (592)
Income tax (benefit) expense (208,742)$ 77,204$ 97,592$
Year ended December 31,
(Amounts in thousands)