Income Taxes

3 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 5 — INCOME TAXES

At June 30, 2021, the Company had $12.2 million of U.S. federal net operating loss (“NOL”) carry forwards. These losses do not expire but are limited to utilization of 80% of taxable income in any one year. At June 30, 2021, the Company had approximately $15.3 million of U.S. state NOL carry forwards. The tax benefits related to these state NOL carry forwards and future deductible temporary differences are recorded to the extent management believes it is more likely than not that such benefits will be realized. The

income of foreign subsidiaries before taxes was $18,000 for the three months ended June 30, 2021 as compared to income before taxes of $22,000 for the three months ended June 30, 2020.       

The Company analyzed the future reasonability of recognizing its deferred tax assets at June 30, 2021. As a result, the Company concluded that a 100% valuation allowance of approximately $3,800,000 would be recorded against the assets.

During the three months ended June 30, 2021 and June 30, 2020, the Company recorded income tax expense of approximately $11,000 and $6,300, respectively, primarily resulting from state income taxes.       

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of June 30, 2021, the Company’s open tax years for examination for U.S. federal tax are 2016-2021, and for U.S. states’ tax are 2015-2021. Based on the outcome of tax examinations or due to the expiration of statutes of limitations, it is reasonably possible that the unrecognized tax benefits related to uncertain tax positions taken in previously filed returns may be different from the liabilities that have been recorded for these unrecognized tax benefits. As a result, the Company may be subject to additional tax expense.

As of June 30, 2021 the Company is asserting under ASC 740-30 that all of the unremitted earnings of its foreign subsidiaries are indefinitely invested. The Company evaluates this assertion each period based on a number of factors, including the operating plans, budgets, and forecasts for both the Company and its foreign subsidiaries; the long-term and short-term financial requirements in the U.S. and in each foreign jurisdiction; and the tax consequences of any decision to repatriate earnings of foreign subsidiaries to the U.S.

At both June 30, 2021 and March 31, 2021, the Company had a federal tax liability of approximately $2,031,000 related to the repatriation of the Company’s undistributed earnings of its foreign subsidiaries as required by the Tax Cuts and Jobs Act of 2017. The Company’s short term portion was approximately $195,000 and the long term portion was approximately $1,836,000. The liability is payable over 8 years. The first five installments are each 8% of the liability, the sixth is 15%, the seventh is 20% and the final installment is 25%. As of June 30, 2021, the Company has made three of the eight installments.