INCOME TAXES

The following table presents the components of income tax expense:



	For the Fiscal Year Ended March 31,
(In thousands)	2018			2017
Federal:
Current	$	(4	)	$	(140	)
Deferred	—			—
Total federal	(4		)	(140		)
State:
Current	405			392
Deferred	—			—
Total state	405			392
Income tax expense	$	401		$	252

Net deferred taxes consisted of the following:



	As of March 31,
(In thousands)	2018				2017
Deferred tax assets:
Net operating loss carryforwards	$	6,680			$	98,232
Stock-based compensation	1,993				2,742
Intangibles	5,918				8,100
Accrued liabilities	1,332			1,332	1,765
Allowance for doubtful accounts	852			852	1,075
Capital loss carryforwards	3,009				4,454
Other	648				457
Total deferred tax assets before valuation allowance	20,432				116,825
Less: Valuation allowance	(15,880		)		(106,718		)
Total deferred tax assets after valuation allowance	$	4,552			$	10,107
Deferred tax liabilities:
Depreciation and amortization	$	(4,552	)		$	(10,107	)
Intangibles	—				—
Total deferred tax liabilities	(4,552		)		(10,107		)
Net deferred tax	$	—			$	—

Under the provisions of the Internal Revenue Code, certain substantial changes in our ownership may result in a limitation on the amount of net operating losses that may be utilized in future years. During the year ended March 31, 2018, approximately $233.5 million of our net operating losses became subject to limitation under Internal Revenue Code Section 382 in connection with the consummation in November 2017 of the transactions under the Stock Purchase Agreement with Bison. It is estimated that approximately $209.0 million of our net operating losses will not be able to be utilized because of the ownership change. As a result of the ownership change, we reduced our gross deferred tax assets and valuation allowance by $81.9 million as of March 31, 2018, which has no impact on our consolidated financial statements for the year ended March 31, 2018. Net operating losses of approximately $3.7 million, which were generated since November 2017, are currently not subject to an annual limitation under Section 382. Future significant ownership changes could cause a portion or all of these net operating losses to expire before utilization.

During the year ended March 31, 2018, we realized approximately $26.2 million of cancellation of indebtedness income for tax purposes, which is excluded from taxable income under the provisions of Internal Revenue Code Section 108. In connection with the exclusion, we reduced our net operating losses by approximately $26.2 million. This gave rise to a reduction of approximately $10.2 million of our gross deferred tax assets and valuation allowance as of March 31, 2018, which has no impact on our consolidated financial statements for the year ended March 31, 2018.

The Tax Cuts and Jobs Act (the "Act") was enacted in December 2017. Among other things, the Act reduced the U.S. federal corporate tax rate from 34 percent to 21 percent as of January 1, 2018 and eliminated the alternative minimum tax (“AMT”) for corporations. Since the deferred tax assets are expected to reverse in a future year, it has been tax effected using the 21% federal corporate tax rate. As a result of the reduction in the corporate tax rate, we decreased our gross deferred tax assets by approximately $7.2 million which was offset by a corresponding decrease to the valuation allowance as of March 31, 2018, which has no impact on our consolidated financial statements for the year ended March 31, 2018. Additionally, the Company has an investment in a foreign subsidiary for which the cumulative earnings and profits of this entity was estimated to be negative. Accordingly, the Company has not recorded a provisional amount for the transition tax enacted under the Act.

On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin 118, which allows a measurement period, not to exceed one year, to finalize the accounting for the income tax impacts of the Tax Act. Until the accounting for the income tax impacts of the Tax Act is complete, the reported amounts are based on reasonable estimates, are disclosed as provisional and reflect any adjustments in subsequent periods as they refine their estimates or complete their accounting of such tax effects.

We have provided a valuation allowance equal to our net deferred tax assets for the years ended March 31, 2018 and 2017. We are required to recognize all or a portion of our deferred tax assets if we believe that it is more likely than not that such assets will be realized, given the weight of all available evidence. We assess the realizability of the deferred tax assets at each interim and annual balance sheet date. In assessing the need for a valuation allowance, we considered both positive and negative evidence, including recent financial performance, projections of future taxable income and scheduled reversals of deferred tax liabilities. We decreased the valuation allowance by $90.8 million during the fiscal year ended March 31, 2018, primarily due to write-downs of the deferred tax assets due to a Section 382 ownership change limitation on the net operating losses, a Section 108 tax attribute reduction, and other decreases in the deferred tax assets related to changes in the tax rates due to the Act. We increased the valuation allowance by $2.4 million during the fiscal year ended March 31, 2017 due to increases in the deferred tax assets. We will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results.

At March 31, 2018, we had Federal and state net operating loss carryforwards of approximately $24.3 million available in the United States of America ("US") and approximately $0.6 million in Australia to reduce future taxable income. The US federal and state net operating loss carryforwards will begin to expire in 2020. The Australian net operating loss carryforward does not expire.

At March 31, 2018, we had Federal and state capital loss carryforwards of approximately $11.4 million available to reduce future capital gains. The capital loss carryforwards were generated during the year ended March 31, 2014 and expire after the year ending March 31, 2019. During the year ended March 31, 2017, approximately $9.0 million of capital loss carryforwards that were generated during the year ended March 31, 2011, expired.

The differences between the United States statutory federal tax rate and our effective tax rate are as follows:



	For the fiscal years ended March 31,
	2018		2017
Provision at the U.S. statutory federal tax rate	30.8	%	34.0	%
State income taxes, net of federal benefit	9.0	%	6.6	%
Change in valuation allowance	501.8	%	(19.2	)%
Non-deductible expenses	(2.7	)%	(11.6	)%
Net operating loss decrease under IRC 382	(511.3	)%	—	%
Effect of tax reform	(40.2	)%	—	%
Expired capital loss carry forward	—	%	(20.8	)%
Losses from non-consolidated entities	10.0	%	10.7	%
Other	0.4	%	(1.4	)%
Income tax expense	(2.2	)%	(1.7	)%

We file income tax returns in the U.S. federal jurisdiction, various states and Australia. For federal income tax purposes, our fiscal 2015 through 2018 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. For state tax purposes, our fiscal 2014 through 2018 tax years generally remain open for examination by most of the tax authorities under a four-year statute of limitations. For Australian tax purposes, fiscal tax years ended March 31, 2016 through 2018 are open for examination.