Income Taxes

12 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

Income tax expense consists of the following for the years ended March 31:

	(In thousands)
	2022		2021
Current:
Federal	$	116	$	969
State		35		-
Total current		151		969
Deferred:
Federal		800		1,447
State		97		179
Total deferred		897		1,626
Income tax expense	$	1,048	$	2,595

The net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes are reflected in deferred income taxes. Significant components of the Company’s deferred tax assets consist of the following as of March 31:

	(In thousands)
Deferred Tax Assets	2022		2021
Allowance for credit losses not currently deductible    for tax purposes	$	900	$	1,647
Share-based compensation		79		125
State net operating loss carryforwards		507		496
Right of use liability		1,094		826
Other items		175		158
Total deferred tax assets		2,755		3,252
Deferred tax liabilities
Right of use asset		1,062		832
Other items		308		137
Total deferred tax liabilities		1,370		969
Deferred income taxes	$	1,385	$	2,283

Income tax expense reflects an effective U.S tax rate, which differs from the corporate tax rate for the following reasons:

	(In thousands)
	2022		2021
Income tax expense at Federal statutory rate	$	855	$	2,303
Increase (decrease) resulting from:
State income taxes, net of Federal benefit		142		378
Other		51		(86	)
Income tax expense	$	1,048	$	2,595

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of positive evidence evaluated was the cumulative pre-tax income over the three-year period ended March 31, 2022, cumulative projected pre-tax income for the next three years, previously noted. As of March 31, 2022, a valuation allowance was not required. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income are reduced. Generally, state NOL’s begin to expire March 31, 2039.

The Company considers the earnings of the Company’s U.S. subsidiaries to be indefinitely invested outside Canada on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company’s specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a deferred tax liability related to the Canadian income taxes and U.S. withholding taxes on approximately $155.5 million of undistributed earnings of the U.S. subsidiaries indefinitely invested outside Canada. If the Company decided to repatriate the U.S. earnings, it would need to adjust its income tax provision in the period the Company determined that the earnings will no longer be indefinitely invested outside of Canada.