|12 Months Ended|
Mar. 31, 2016
|Income Tax Disclosure [Abstract]|
The Company utilizes the liability method of accounting for income taxes and deferred taxes which are determined based on the differences between the financial statements and tax bases of assets and liabilities given the provisions of the enacted tax laws. In assessing the realizability of the deferred tax assets, the Company considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized through the generation of future taxable income. In making this determination, the Company assessed all of the evidence available at the time including recent earnings, forecasted income projections, and historical financial performance. The Company has fully reserved deferred tax assets as a result of this assessment.
The income tax expense (benefit) from continuing operations are summarized as follows:
The statutory federal income tax rate is reconciled to the Company's effective income tax rates below:
Components of the net deferred income tax assets are as follows:
Net deferred income tax liabilities are classified in the Consolidated Balance Sheets as follows:
In fiscal years 2016 and 2015, the Company continued to maintain a full valuation allowance on deferred tax assets. The valuation allowance increased by $7.0 million in fiscal year 2016. The Company recorded an income tax benefit from continuing operations of $0.1 million and $0.2 million, respectively, that resulted from foreign tax and state tax based on gross margin.
In fiscal year 2014, the Company continued to fully reserve deferred tax assets. The Company acquired Kentrox and CSI in stock transactions. Deferred tax liabilities of $8.3 million resulted from the acquisitions relating primarily to acquired intangible assets. The Company's anticipated ability to realize deferred tax assets from the reversal of these deferred tax liabilities resulted in a reversal of valuation allowance. Income tax expense, excluding the impact of the acquisitions noted above, was $0.4 million primarily from state income tax expense in non-unitary states and states with taxes based on gross margin, not taxable income.
The Company has, on a tax effected basis, approximately $1.5 million in tax credit carryforwards and $34.8 million of federal net operating loss carryforwards that are available to offset taxable income in the future. The tax credit carryforwards will begin to expire in fiscal year 2022. The federal net operating loss carryforwards begin to expire in fiscal year 2023. State net operating loss carryforwards, on a tax effected basis and net of federal tax benefits, are $6.3 million. The state net operating loss carryforwards begin to expire in fiscal year 2017.
The Company accounts for uncertainty in income taxes under ASC 740, which prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits for fiscal years 2015 and 2016 is as follows:
If the unrecognized tax benefit balances at March 31, 2016, and 2015, were recognized, it would affect the effective tax rate.
The Company recognized interest and penalties of $2,000, $6,000 and $3,000 as a component of income tax expense as of March 31, 2016, 2015, and 2014, respectively. As of March 31, 2016 and 2015, accrued interest and penalties were $9,800 and $8,400, respectively.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates.
With few exceptions, the major jurisdictions subject to examination by the relevant taxable authorities, and open tax years, stated as the Company's fiscal years, are as follows:
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef