INCOME TAXES

12 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 14 — INCOME TAXES

The total provision (benefit) for income taxes consists of the following for the fiscal years ended (dollars in thousands):

	Fiscal Year Ended March 31,
	2022		2021			2020
Current	$	179	$	244		$	84
Deferred		1,980		(19,860	)		75
Total	$	2,159	$	(19,616	)	$	159
	2022		2021			2020
Federal, Current	$	—	$	—		$	17
Federal, Deferred		1,658		(16,217	)	$	39
Total Federal		1,658		(16,217	)		56
State, Current		179		244			67
State, Deferred		322		(3,643	)		36
Total State		501		(3,399	)		103
Total	$	2,159	$	(19,616	)	$	159

A reconciliation of the statutory federal income tax rate and effective income tax rate is as follows:

	Fiscal Year Ended March 31,
	2022			2021			2020
Statutory federal tax rate		21.0	%		21.0	%		21.0	%
State taxes, net		5.2	%		5.3	%		4.9	%
Change in valuation reserve		(0.4	)%		(321.4	)%		(25.0	)%
Permanent items		(1.9	)%		(3.4	)%		(1.0	)%
Change in tax contingency reserve		0.1	%		(0.5	)%		0.2	%
Equity compensation cancellations		0.1	%		0.6	%		0.2	%
State return to provision		2.3	%		(1.7	)%		1.2	%
Other, net		(0.2	)%		(0.9	)%		(0.2	)%
Effective income tax rate		26.2	%		(301.0	)%		1.3	%

The net deferred tax assets reported in the accompanying consolidated financial statements include the following components (dollars in thousands):

	March 31,
	2022			2021
Deferred tax assets:
Inventory, accruals and reserves		809			860
Federal and state operating loss carry-forwards		16,485			18,313
Tax credit carry-forwards		1,847			1,916
Equity compensation		231			198
Deferred revenue		29			38
Lease liability		670			853
Other		247			406
Total deferred tax assets		20,318			22,584
Valuation allowance		(1,249	)		(1,279	)
Deferred tax assets, net of valuation allowance		19,069			21,305
Deferred tax liabilities:
Lease ROU asset		(518	)		(670	)
Fixed assets		(529	)		(626	)
Intangible assets		(217	)		(224	)
Total deferred tax liabilities		(1,264	)		(1,520	)
Total net deferred tax assets	$	17,805		$	19,785

For fiscal year ended March 31, 2022, Orion’s deferred tax assets were primarily the result of U.S. NOL and tax credit carryforwards. Orion recorded a valuation allowance of $1.2 million and $1.3 million against its net deferred tax asset balance as of March 31, 2022 and March 31, 2021, respectively, due to the uncertainty of its realization value in the future. For the year ended March 31, 2022, Orion recorded no material change in the valuation allowance on the basis of management’s continued reassessment of the amount of its deferred tax assets that are more likely than not to be realized. For the year ended March 31, 2021, Orion recorded a net valuation allowance release of $20.9 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. As of March 31, 2021, in part because Orion achieved its second full year of pretax income and three years of cumulative pretax income in the U.S. federal tax jurisdiction, management determined there was sufficient positive evidence to conclude that it is more likely than not that deferred taxes assets of $20.9 are realizable. It therefore reduced the valuation allowance accordingly.

As of March 31, 2022, Orion has federal NOL carryforwards of approximately $61.8 million, state NOL carryforwards of approximately $56.7 million, and foreign NOL carryforwards of approximately $0.8 million. Orion also had federal tax credit carryforwards of approximately $1.3 million and state tax credits of $0.7 million. All of Orion's tax credit carryforwards and $111.0 million of its NOL carryforwards will begin to expire in varying amounts between 2023 and 2033. The remaining $8.3 million of its federal and state NOL carryforwards are not subject to time restrictions but may only be used to offset 80% of adjusted taxable income. Orion believes it is more likely than not that the benefit from its state credit carryforwards, foreign NOL carryforwards, a portion of its federal credit carryforwards, and certain state loss carryforwards will not be realized. In recognition of this risk, Orion has provided a valuation allowance of $1.2 million on the deferred tax assets related to these carryforwards.

Generally, a change of more than 50% in the ownership of Orion's stock, by value, over a three-year period constitutes an ownership change for federal income tax purposes as defined under Section 382 of the Internal Revenue Code. As a result, Orion's ability to use its net operating loss carryforwards, attributable to the period prior to such ownership change, to offset taxable income can be subject to limitations in a particular year, which could potentially result in increased future tax liability for Orion. There was no limitation of NOL carryforwards that occurred for fiscal 2022, fiscal 2021, or fiscal 2020.

Orion records its tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where Orion believes that a tax position is supportable for income tax purposes, the item is included in their income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities, or the expiration of the statute of limitations.

Orion files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company's federal tax returns for tax years beginning April 1, 2018 or later are open. For states in which Orion files state income tax returns, the statute of limitations is generally open for tax years beginning April 1, 2018 or later.

State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state effect of any federal changes remains subject to examination by various states for a period of up to two years after formal notification to the states. Orion currently has no state income tax return positions in the process of examination, administrative appeals or litigation.

Uncertain tax positions

As of March 31, 2022, the balance of gross unrecognized tax benefits was approximately $0.2 million, all of which would affect Orion’s effective tax rate if recognized.

Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as other liabilities (non-current) to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest are included in the unrecognized tax benefits. Accrued interest and penalties for such unrecognized tax benefits as of March 31, 2022 and 2021 were $0.1 million. Orion had the following unrecognized tax benefit activity (dollars in thousands):

	Fiscal Year Ended March 31,
	2022			2021			2020
Unrecognized tax benefits as of beginning of fiscal year	$	285		$	259		$	130
Additions based on tax positions related to the current period positions		39			123			23
Additions/(reductions) for tax positions of prior years		(109	)		(97	)		106
Unrecognized tax benefits as of end of fiscal year	$	215		$	285		$	259