Income Taxes

3 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled. iFresh is a Delaware holding company that is subject to the U.S. income tax.

NYM is taxed as a corporation for income tax purposes and as a result of the “Contribution Agreement” entered into in December 31, 2014 NYM has elected to file a consolidated federal income tax return with its eleven subsidiaries. NYM and the shareholders of the eleven entities, as parties to the Contribution Agreement, entered into a tax-free transaction under Section 351 of the Internal Revenue Code of 1986 whereby the eleven entities became wholly owned subsidiaries of the Company. As a result of the tax-free transaction and the creation of a consolidated group, the subsidiaries are required to adopt the tax year-end of its parent, NYM. NYM was incorporated on December 30, 2014 and has adopted a tax-year end of March 31.

RET and DL Medical are incorporated in the PRC and subject to PRC income tax which is computed according to the relevant laws and regulations in the PRC. Under the Corporate Income Tax Law of PRC, current corporate income tax rate of 25% is applicable to all companies, including both domestic and foreign-invested companies.

Certain of the subsidiaries have incurred net operating losses (“NOL”) in tax years ending prior to the Contribution Agreement. The net operating losses are subject to the Separate Return Limitation Year (“SRLY”) rules which limit the utilization of the losses to the subsidiaries who generated the losses. The SRLY losses are not available to offset taxable income generated by members of the consolidated group.

Based upon management’s assessment of all available evidence, the Company believes that it is more-likely-than-not that the deferred tax assets, primarily for certain of the subsidiaries SRLY NOL carry-forwards will not be realizable; and therefore, a full valuation allowance is established for SRLY NOL carry-forwards. Pursuant to The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, NOLs from the 2018, 2019, and 2020 tax years to be carried back to the previous five tax years (beginning with the earliest year first) and suspends the 80% of taxable income limitation through the 2020 tax year. The NOL carryback can result in an immediate refund of taxes paid in prior years. The valuation allowance for deferred tax assets was $7,749,248 and $7,643,963 as of June 30, 2020 and March 31, 2020.

The Company has approximately $26,743,963 and $30,496,643 of US NOL carry forward of which approximately $2,749,947 and $3,135,816 are SRLY NOL as of June 30, 2020 and March 31, 2020, respectively. The Company also has $4,789,759 NOL from its Chinese entities, which was fully reserved as valuation allowance. For income tax purposes, those NOLs will expire in the year 2033 through 2037. 

Income Tax Provision (Benefit)

The provision (benefit) for income taxes consists of the following components: 

	For the three months ended
	June 30,
	2020		2019
Current:
Federal	$	-	$	-
State		-		-
		-		-
Deferred:
Federal		-		(73,453	)
State		-		(24,484	)
		-		(97,937	)
Total	$	-	$	(97,937	)

Tax Rate Reconciliation

Following is a reconciliation of the Company’s effective income tax rate to the United State federal statutory tax rate:

	For the three months ended June 30,
	2020			2019
Expected tax at U.S. statutory income tax rate		21	%		21	%
State and local income taxes, net of federal income tax effect		7	%		7	%
Other non-deductible fees and expenses		-	%		(0.8	)%
Changes in deferred tax allowance		(28	)%		(24.4	)%
Effective tax rate		0.0	%		2.8	%

Deferred Taxes

The effect of temporary differences included in the deferred tax accounts in the two tax jurisdiction in US and China are as follows:

	June 30,			March 31,
	2020			2020
Deferred Tax Assets/ (Liabilities) in US
Deferred expenses	$	200,697		$	164,434
Sec 263A Inventory Cap		136,304			38,207
Deferred rent/Lease obligation		2,217,905			2,215,294
Depreciation and amortization		(3,186,433	)		(3,008,058	)
Net operating losses		7,826,452			8,305,813
Valuation allowance		(6,551,809	)		(7,643,963	)
Net Deferred Tax Assets (Liabilities) in US	$	643,116		$	643,116

	June 30,			March 31,
	2020			2020
Deferred Tax Assets/ (Liabilities) in China
Intangible assets	$	(838,784	)	$	-
Property and equipment		(244,979	)		-
Net operating losses		1,197,440			-
Valuation allowance		(1,197,440	)		-
Net Deferred Tax Assets (Liabilities) in China	$	(1,083,763	)	$	-