Company: FCAP
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001171843-25-001868
Chunk: 44

Company: FIRST CAPITAL INC
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1
Chunk 44
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 considered as made from the base year bad debt reserve.  To the extent that such reserves exceed the amount that would have been allowed under the experience method (“Excess Distributions”), then an amount based on the amount distributed will be included in the Bank’s taxable income.  Non-dividend distributions include distributions in excess of the Bank’s current and accumulated earnings and profits, distributions in redemption of stock, and distributions in partial or complete liquidation.  However, dividends paid out of the Bank’s current or accumulated earnings and profits, as calculated for federal income tax purposes, will not be considered to result in a distribution from the Bank’s bad debt reserve.  Thus, any dividends to the Company that would reduce amounts appropriated to the Bank’s bad debt reserve and deducted for federal income tax purposes would create a tax liability for the Bank.  The amount of additional taxable income created from an Excess Distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution.  If the Bank makes a “non-dividend distribution,” then approximately one and one-third times the amount so used would be includable in gross income for federal income tax purposes, assuming a 21% corporate income tax rate (exclusive of state and local taxes).  The Bank does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserve.

State Taxation

Indiana.  Effective July 1, 2013, Indiana amended its tax code to provide for reductions in the franchise tax rate.  For the years ended December 31, 2022, 2023 and 2024, Indiana imposed a franchise tax based on a financial institution’s adjusted gross income as defined by statute at rates of 5.00%, 4.90% and 4.90%, respectively.  The Indiana franchise tax rate will remain at 4.90% in future years.  In computing Indiana taxable income, deductions for municipal interest, state and local income taxes and certain accelerated depreciation permitted for federal tax purposes are disallowed.  The Company’s Indiana tax returns for 2018, 2019 and 2020 were audited by the Indiana Department of Revenue during 2022. 

Kentucky.  For the years ended December 31, 2022, 2023 and 2024, the Company was subject to Kentucky Corporate income taxes at a rate of 5.00%.  The Company’s Kentucky tax returns have not been audited in the