7. Income Tax

6 Months Ended

Sep. 30, 2014

Notes to Financial Statements

7. Income Tax

The provision for income tax is comprised of:
	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Current:
Federal	$	77,000	$	35,000	$	79,000	$	55,000
State		9,000		8,000		13,000		15,000
Total current income tax		86,000		43,000		92,000		70,000
Deferred:
Federal		197,000		342,000		397,000		475,000
State		10,000		20,000		21,000		28,000
Total deferred income tax		207,000		362,000		418,000		503,000
Income tax expense	$	293,000	$	405,000	$	510,000	$	573,000

A reconciliation between the income tax provision at the statutory rate on income tax and the income tax provision for the three and six months ended is as follows:

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Federal tax at statutory rate	$	478,000		$	555,000		$	891,000		$	847,000
State taxes, net of federal benefit		14,000			23,000			26,000			32,000
Excess percentage depletion		(200,000	)		(175,000	)		(403,000	)		(310,000	)
Other adjustments, net		1,000			2,000			(4,000	)		4,000
Income tax expense	$	293,000		$	405,000		$	510,000		$	573,000
Effective rate expressed as a percentage
of income before income tax		20.8	%		24.9	%		19.5	%		23.0	%

The overall effective tax rate expressed as a percentage of book income before income tax for the current three and six month periods, as compared to the same periods in the prior year, was lower due to an increase in the deduction for excess percentage depletion related to an increase in annualized oil and gas sales.

Net deferred tax assets and liabilities were comprised of:	September 30,			March 31,
	2014			2014
	(Unaudited)
Deferred tax assets:
Statutory depletion carry-forward	$	2,466,000		$	2,190,000
Net operating loss carry-forward		14,000			-
Other accruals		67,000			103,000
Allowance for doubtful accounts		5,000			5,000
Gross deferred tax assets		2,552,000			2,298,000
Deferred tax liabilities:
Depletion, depreciation and intangible drilling costs		(7,454,000	)		(6,784,000	)
Gross deferred tax liabilities		(7,454,000	)		(6,784,000	)
Deferred tax liabilities, net	$	(4,902,000	)	$	(4,486,000	)

Projections of future income taxes and their timing require significant estimates with respect to future operating results.  Accordingly, deferred taxes may change significantly as more information and data is gathered with respect to such events as changes in commodity prices, their effect on the estimate of oil and gas reserves and the depletion of these long-lived reserves.

The Company is subject to U.S. federal income tax and income tax from multiple state jurisdictions.

The Company's federal income tax returns for the prior three tax years of filings and state income tax returns for the prior four years of tax filings are still subject to examination by tax authorities.