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Income Taxes
 12 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of current and deferred federal and state income tax (benefit) provision are as follows:
Year Ended March 31,
202220212020
(In thousands)
Income (loss) from continuing operations before income taxes$(6,726)$606 $(1,598)
Current income tax provision:
Federal— 0—
State75 67 34 
Total current tax provision75 67 34 
Deferred income tax provision:
Federal33 21105 
State66 2721 
Total deferred tax provision99 48126 
Provision for income taxes on continuing operations174 115 160 
Income (loss) from continuing operations, net of taxes$(6,900)$491 $(1,758)
The reconciliation of our income tax (benefit) provision to taxes computed at U.S. federal statutory rates is as follows:
Year Ended March 31,
202220212020
(In thousands)
Provision (benefit) for income taxes at statutory rates$(1,422)$90 $(1,095)
State income taxes net of federal benefit(559)(177)(198)
Tax credits(141)(663)(658)
Compensation charges34 313 151 
Change in valuation allowance2,169 523 1,913 
Other93 29 47 
Provision for income taxes$174 $115 $160 
The components of deferred tax assets and liabilities are as follows:
March 31,
20222021
(In thousands)
Deferred tax assets:
Net operating losses$3,980 $2,186 
Capitalized R&D1,808 2,282 
Credit carry forwards4,530 4,088 
Deferred compensation and payroll2,902 2,475 
Bad debt allowance and other reserves1,299 930 
Property and equipment297 354 
Acquired intangibles129 — 
Other, net171 765 
Total deferred tax assets15,116 13,080 
Valuation allowance(14,552)(12,349)
Total deferred tax assets, net of valuation allowance564 731 
Deferred tax liabilities:
Acquired intangibles— (297)
Goodwill(901)(672)
Total deferred tax liabilities(901)(969)
Net deferred tax liabilities$(337)$(238)
At March 31, 2022, we had $3.3 million in federal research credits that begin to expire in 2031 and $1.5 million in state tax credits that begin to expire in 2023. We had $16.0 million of federal net operating loss carryforwards at March 31, 2022 that do not expire as a result of recent tax law changes. We also had $9.9 million of state net operating loss carryforwards at March 31, 2022 that begin to expire in 2031.
In assessing the realizability of our deferred tax assets, we review all available positive and negative evidence, including reversal of deferred tax liabilities, potential carrybacks, projected future taxable income, tax planning strategies and recent financial performance. As the Company has sustained a cumulative pre-tax loss over the trailing three years, we considered it appropriate to maintain valuation allowances of $14.6 million and $12.3 million against our deferred tax assets at March 31, 2022 and 2021, respectively. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.
On March 27, 2020, the CARES Act was enacted in response to the Pandemic. The CARES Act contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses arising in taxable years beginning after December 31, 2017. The income tax provisions of the CARES Act had an immaterial impact on our current taxes, deferred taxes, and uncertain tax positions of the Company in the year ended March 31, 2022. The CARES Act also allows for the deferral of payroll taxes, as well as the immediate refund of federal Alternative Minimum Tax credits, which had previously been made refundable over a period of four years by the Tax Cuts and Jobs Act of 2017. The Company is utilizing the provision of the CARES Act allowing for the deferral of payroll taxes as of March 31, 2022.
Unrecognized Tax Benefits
As of March 31, 2022 and 2021, our gross unrecognized tax benefits were approximately $1.2 million and $1.1 million, respectively, of which approximately $1.1 million and $1.0 million, respectively, are netted against certain noncurrent deferred
tax assets. The amounts that would affect our effective tax rate if recognized are approximately $1.1 million and $1.0 million, respectively.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
Year Ended March 31,
202220212020
(In thousands)
Gross unrecognized tax benefits at beginning of year$1,079 $952 $687 
Increases for tax positions taken in prior years— 35 101 
Decreases for tax positions taken in prior years(29)— —
Increases for tax positions taken in the current year159 104 180 
Lapse in statute of limitations(11)(12)(16)
Gross unrecognized tax benefits at March 31$1,198 $1,079 $952 
We do not anticipate a significant change in gross unrecognized tax benefits within the next twelve months. We are subject to taxation in the U.S. and various state tax jurisdictions. We are subject to U.S. federal tax examination for fiscal tax years ended March 31, 2019 or later, and state and local income tax examination for fiscal tax years ended March 31, 2018 or later. However, if net operating loss carryforwards that originated in earlier tax years are utilized in the future, the amount of such NOLs from such earlier years remain subject to review by tax authorities.