|12 Months Ended|
Mar. 31, 2020
|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:
In fiscal years 2020 and 2019, the Company continued to maintain a full valuation allowance on deferred tax assets. The valuation allowance increased by $2.1 million in fiscal year 2020. As of March 31, 2020 and 2019, respectively, the Company has $348,000 and $697,000 tax receivables associated with a prior AMT credit carryforward. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“H.R. 748”) (the “CARES Act”). Among the changes to the U.S. federal income tax rules, the CARES Act accelerated the timeframe for refunds of AMT credits. The Company expects to recover the entire remaining amount in fiscal year 2021 via tax refunds. There is no other material impact to the Company related to the CARES Act. The decrease in the tax receivable represents a tax refund received during the third quarter of fiscal year 2020. The Company recorded an income tax expense from continuing operations of $36,000 and $39,000 in fiscal years 2020 and 2019, respectively.
The Company has, on a tax-effected basis, approximately $0.8 million in tax credit carryforwards and $28.8 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 2021. The federal net operating loss carryforwards begin to expire in fiscal year 2022. State tax credit carryforwards and net operating loss carryforwards, on a tax effected basis and net of federal tax benefits, are $0.1 million and $8.2 million, respectively. The remaining state tax credit carryforwards and state net operating loss carry forwards begin to expire in fiscal year 2021. In fiscal year 2020, $0.4 million of state net operating loss carryforwards expired.
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 2019 and 2020 is as follows:
If the unrecognized tax benefit balances at March 31, 2020 and 2019, were recognized, it would affect the effective tax rate.
The Company recognized interest and penalties of $2,600 and $2,500 as a component of income tax expense in fiscal year 2020 and 2019, respectively. As of March 31, 2020 and 2019, accrued interest and penalties were $20,400 and $17,800, 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:
Since net operating loss carryovers are subject to audit based on the year in which they are utilized, all of the Company’s net operating losses generated in the past are open to adjustment by the Internal Revenue Service or state tax authorities (some states have shorter carryover periods).
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://fasb.org/us-gaap/role/ref/legacyRef