INCOME TAXES

12 Months Ended

Mar. 31, 2022

INCOME TAXES [Abstract]

INCOME TAXES

13. INCOME TAXES

We account for our tax positions in accordance with Codification Topic 740. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely of being sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.

Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of March 31, 2022, and March 31, 2021. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

We file income tax returns, including returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. Tax years 2019, 2020, and 2021 are subjected to examination by federal and state taxing authorities. Various state and local income tax returns are also under examination by taxing authorities. We do not believe that the outcome of any examination will have a material impact on our financial statements.

A reconciliation of income taxes computed at the statutory federal income tax rate of 21.0% to the provision for income taxes included in the consolidated statements of operations is as follows (in thousands, except percentages):

	Year Ended March 31,
	2022			2021			2020
Income tax expense computed at the U.S. statutory federal rate	$	30,845		$	22,450		$	20,182
State income tax expense—net of federal benefit		8,937			6,941			5,659
Non-deductible executive compensation		1,749			2,052			613
Other		(247	)		1,066			423
Provision for income taxes	$	41,284		$	32,509		$	26,877
Effective income tax rate		28.1	%		30.4	%		28.0	%

The components of the provision for income taxes are as follows (in thousands):

	Year Ended March 31,
	2022			2021			2020
Current:
Federal	$	32,309		$	26,054		$	19,367
State		11,681			9,882			9,520
Foreign		894			770			200
Total current expense		44,884			36,706			29,087
Deferred:
Federal		(3,289	)		(3,067	)		(492	)
State		(370	)		(1,096	)		(1,799	)
Foreign		59			(34	)		81
Total deferred benefit		(3,600	)		(4,197	)		(2,210	)
Provision for income taxes	$	41,284		$	32,509		$	26,877

Deferred income taxes reflect 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. Significant components of our deferred tax assets and liabilities were as follows (in thousands):

	March 31,
	2022			2021
Deferred tax assets:
Accrued vacation	$	2,391		$	2,537
Deferred revenue		5,090			4,227
Allowance for credit losses		951			1,048
Restricted stock		616			772
Other deferred tax assets		743			1,552
Accrued bonus		2,532			2,277
Lease liabilities		1,857			2,476
Other credits and carryforwards		249			-
Gross deferred tax assets		14,429			14,889
Less: valuation allowance		(250	)		-
Net deferred tax assets		14,179			14,889
Deferred tax liabilities:
Property and equipment		(2,295	)		(2,391	)
Operating leases		(2,759	)		(6,948	)
Prepaid expenses		(887	)		(912	)
Right-of-use assets		(1,869	)		(2,419	)
Tax deductible goodwill		(1,319	)		(751	)
Total deferred tax  liabilities		(9,129	)		(13,421	)
Net deferred tax asset	$	5,050		$	1,468

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. As of March 31, 2022, we established a valuation allowance of $0.3 million, to offset gross deferred tax assets primarily attributable to cumulative net operating losses at certain of the foreign subsidiaries and foreign tax credit carry forwards. We believe that it is more likely than not that we will realize the remaining gross deferred tax assets through generating taxable income or the reversal of existing temporary differences attributable to the gross deferred tax liabilities.