Income Taxes

12 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

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

	(In thousands)
	2023		2022
Current:
Federal	$	22	$	116
State		10		35
Total current		32		151
Deferred:
Federal		708		800
State		677		97
Total deferred		1,385		897
Income tax expense	$	1,417	$	1,048

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	2023			2022
Allowance for credit losses not currently deductible    for tax purposes	$	4,538		$	900
Share-based compensation		20			79
Federal and state net operating loss carryforwards		4,812			507
Right of use liability		43			1,094
Other items		87			175
Valuation Allowance		(9,457	)		-
Total deferred tax assets		43			2,755
Deferred tax liabilities
Right of use asset		43			1,062
Other items		-			308
Total deferred tax liabilities		43			1,370
Deferred income taxes	$	-		$	1,385

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

	(In thousands)
	2023			2022
Income tax (benefit) expense at Federal statutory rate	$	(6,838	)	$	855
Increase (decrease) resulting from:
Change in Valuation Allowance		9,457			-
State income taxes, net of Federal benefit		(1,207	)		142
Other		5			51
Income tax expense	$	1,417		$	1,048

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 negative evidence evaluated was the cumulative pre-tax loss over the three-year period ended March 31, 2023. As of March 31, 2023, a full valuation allowance was recorded against the Company’s net deferred tax asset. The federal net operating loss ("NOL") generated for the year ended March 31, 2023 will carryforward indefinitely. Generally, state NOLs 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 $121.0 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.