Income Taxes

The provision for income taxes was as follows (in thousands):



	Fiscal Year Ended March 31,
	2014		2013			2012
Current
Federal	$	8,110	$	6,111		$	4,205
State	1,934		1,824			1,894
	10,044		7,935			6,099
Deferred
Federal	226		504			893
State	267		(327		)	(451		)
	493		177			442
Provision for income taxes	$	10,537	$	8,112		$	6,541

The reconciliation of the statutory federal income tax rate to the Company’s effective tax is presented below:



	Fiscal Year Ended March 31,
	2014		2013		2012
Tax at federal statutory rate	35.0	%	35.0	%	34.2	%
State income taxes, net of federal benefit	5.5		5.0		5.8
Non-deductible permanent difference	0.5		2.1		2.5
Effect of tax rate change	—		—		(1.0	)
Other	(0.2	)	(0.2	)	(2.0	)
	40.8	%	41.9	%	39.5	%

During fiscal 2014, the Company reduced its taxes payable by $2.5 million, as a result of the exercise of non-qualified stock options. The excess tax benefit associated with stock-based compensation of $2.1 million for the fiscal year ended March 31, 2014, was recorded in additional-paid-in-capital.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are presented below (in thousands):



	March 31,
	2014			2013			2012
Deferred tax assets
Credits and net operating loss carryforwards	$	3,287		$	3,749		$	3,975
Share-based compensation expense	1,134			1,332			1,441
Accrued compensation	934			1,211			895
Reserves and allowances	1,231			1,018			439
Capital loss carryforward	—			428			424
Other, net	1,021			645			729
Gross deferred tax assets	7,607			8,383			7,903
Valuation allowance	—			(428		)	(424		)
Total deferred tax assets	7,607			7,955			7,479
Deferred tax liabilities
Property, plant and equipment	(1,256		)	(1,111		)	(458		)
Total deferred tax liabilities	(1,256		)	(1,111		)	(458		)
Net deferred tax assets	$	6,351		$	6,844		$	7,021

As of March 31, 2013, the Company has a $5.1 million state capital loss carryforward resulting from the disposition of Fantastic Foods in fiscal 2009, for which a full valuation allowance was recorded because management believed it was more likely than not that the Company would not generate a capital gain needed to be able to offset the state capital loss. As of March 31, 2014, this capital loss expired and therefore, the associated deferred tax asset and corresponding valuation allowance have been removed from the balance sheet.

The Company had the following net operating loss (“NOL”) carryforwards (in thousands):



	March 31,
	2014		2013		2012
Federal	$	8,274	$	9,276	$	9,931
State	6,605		7,165		7,686

These NOL carryforwards are available to offset future federal and state taxable income through 2027 and 2021, respectively. Pursuant to Section 382 of the Internal Revenue Code, if there is a change in stock ownership of the Company exceeding 50% during a three-year period, the utilization of the Company’s NOL carryforwards may be limited. The business acquisitions in fiscal 2005 resulted in a change in stock ownership and, consequently, the Company’s NOLs generated prior to these ownership changes are subject to an annual limitation.

The Company files consolidated tax returns for federal income taxes as well as for state income taxes in various state jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. These audits include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state, and local tax laws. Due to net operating loss carryovers, the Company is open for U.S. federal and state income tax examinations for fiscal 1999 until 2007 and then once again for U.S. federal income tax examinations for fiscal 2011 and beyond and for state income tax examinations for fiscal 2010 and beyond.

The Company did not have any unrecognized tax positions at March 31, 2014, 2013 and 2012 that if recognized would affect the annual effective tax rate. During the years ended March 31, 2014, 2013 and 2012, the Company did not record any accrued interest or penalties for federal and state income tax purposes. The Company does not expect material changes in the total amount of unrecognized tax benefits within the next 12 months, but the outcome of tax matters is uncertain and unforeseen results can occur.