Income Taxes

9 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 6. Income Taxes

The Company recorded an income tax benefit of approximately $0 million for the three months ended December 31, 2023 compared to an income tax expense of approximately $3.0 million for the three months ended December 31, 2022. The Company’s effective tax rate decreased to 0.0% for the three months ended December 31, 2023 from -29.1% for the three months ended December 31, 2022.

The Company recorded an income tax benefit of $0 for the nine months ended December 31, 2023 compared to an income tax expense of approximately $1.4 million for the nine months ended December 31, 2022. The Company’s effective tax rate decreased to 0.0% for the nine months ended December 31, 2023 from -8.4% for the nine months ended December 31, 2022. The lower effective tax rate for the three and nine months ended December 31, 2023 is primarily attributable to the establishment of a valuation allowance as of December 31, 2022.

During the quarter ended December 31, 2022, the Company determined there was not sufficient positive evidence of future earnings to support a position that it will be able to realize its net deferred tax asset. The Company has significant negative evidence to overcome in the form of cumulative pre-tax losses from continuing operations. Therefore, it will continue to maintain a full valuation allowance on its U.S. federal and state net deferred tax asset. The Company does not have any material unrecognized tax benefits as of December 31, 2023.

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 income tax assets consist of the following:

	(In thousands)
	December 31, 2023			March 31, 2023
Valuation allowances on finance receivables	$	4,777		$	4,538
Share-based compensation		30			20
Federal and state net operating loss carryforwards		9,196			4,812
Right of use liability		33			43
Other items		29			87
Valuation allowance		(14,001	)		(9,457	)
Total deferred tax assets		64			43
Deferred tax liabilities
Right of use asset		33			43
Other items		31			-
Total deferred tax liabilities		64			43
Deferred income taxes	$	-		$	-

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 December 31, 2023, as a result of which, a full valuation allowance remained recorded against the Company’s net deferred tax asset.

The federal net operating loss ("NOL") generated beginning in 2021 and thereafter will carry forward indefinitely, while some state NOLs begin to expire March 31, 2039. As of December 31, 2023, the Company maintained a deferred income tax valuation allowance of $14.0 million, the remaining state gross NOL was $57.3 million, and the remaining federal gross NOL amounted to $36.2 million.