
	Year Ended March 31,
	2021		2020
Current:
Federal	$	(3,330)	$	43
State	130		(8)
Foreign	39		—
Total current	(3,161)		35
Deferred:
Federal	91		(481)
State	(317)		(98)
Total deferred	(226)		(579)

Total	$	(3,387)	$	(544)

Income tax expense attributable to (loss) income from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate of 21% to pretax (loss) income from continuing operations as follows (in thousands):


	Year Ended March 31,
	2021				2020
Expected Federal income tax (benefit)/ expense U.S. statutory rate	$	(2,472)	21.0	%	$	551	21.0	%
State income taxes, net of federal benefit	(271)		2.3	%	(519)		-19.8	%
Nontaxable cancellation of debt income	—		0.0	%	(1,331)		-50.7	%
Micro-captive insurance benefit	(217)		1.8	%	(172)		-6.6	%
Change in valuation allowance	621		-5.3	%	(7,789)		-296.8	%
Income attributable to minority interest - Contrail	247		-2.1	%	(325)		-12.4	%
Write-off Delphax tax attributes	—		0.0	%	9,353		356.4	%
Acquired Net Operating Loss ("NOL") carrybacks; CARES Act	—		0.0	%	(363)		-13.8	%
NOL Carryback - Rate Differential	(1,468)		12.5	%	—		0.0	%
Other differences, net	173		-1.4	%	51		1.9	%
Income tax benefit	$	(3,387)	28.8	%	$	(544)	-20.7	%

During the fiscal period ended March 31, 2020, the Company sold GAS. See Note 2. The tax benefit related to this entity allocated to discontinued operations for March 31, 2020 was $0.6 million. In addition, a gain on the sale of discontinued operations was recognized, resulting in a net of tax gain of $8.2 million.

The Company has state gross operating losses of $6.4 million at March 31, 2021. These net operating losses will begin to expire in tax year 2030. The Company has foreign tax credits of $0.5 million that will begin to expire in tax year 2026.

DSI and Delphax (collectively known as the “Delphax entities”) are not included in Air T’s consolidated tax return. During the year ended March 31, 2021, DSI and Delphax accounted for $0.3 million and $(0.1) million, respectively, of fiscal year 2021's valuation allowance effect. During the year ended March 31, 2020, each entity, respectively, accounted for $0.2 million and $(8.9) million of the fiscal year 2020's valuation allowance effect. The valuation allowance release in March 31, 2020 relates to attribute reduction for cancellation of debt income and dissolution of the Canadian and UK subsidiaries (See Note 4). Impairment on investments and changes in unrealized losses related to available-for-sale securities and foreign tax credits accounted for the remaining valuation allowance effect for each year.

In March of 2020, the CARES Act was enacted and made significant changes to federal tax laws, including certain changes that were retroactive to the March 31, 2020 tax year. Changes in tax laws are accounted for in the period of enactment and the retroactive effects are recognized in these financial statements. Of the changes impactful to the Company, the CARES act permits favorable treatment of deductible interest expense as well as the ability to carryback tax losses incurred in the March 31, 2021 fiscal year up to 5 years and recoup previously paid federal income taxes; under which the Company was subject to a higher federal tax rate. The benefit of the recoupment of these taxes are included in these consolidated financial statements and the Company expects to receive a refund of $3.4 million.


	2021		2020
Net operating loss & attribute carryforwards	$	4,094	$	3,524

Unrealized losses on investments	1,504		1,693
Investment in foreign subsidiaries	1,331		1,369
Investment in partnerships	821		840

Lease liabilities	1,999		1,909
Other deferred tax assets	1,991		1,019
Total deferred tax assets	11,740		10,354

Bargain purchase gain	(470)		(385)
Property and equipment	(1,184)		(485)
Right-of-use assets	(1,838)		(1,791)
Capital gain deferment	(1,782)		(1,700)
Other deferred tax liabilities	(35)		(167)
Total deferred tax liabilities	(5,309)		(4,528)

Net deferred tax asset	$	6,431	$	5,826

Less valuation allowance	(7,026)		(6,405)

Net deferred tax liability	$	(595)	$	(579)

As described in Note 4, effective on November 24, 2015, Air T, Inc. purchased interests in Dephax. With an equity investment level by the Company of approximately 67%, Delphax is required to continue filing a separate United States corporate tax return. Furthermore, Delphax has foreign subsidiaries located in France, and historically had foreign subsidiaries located in Canada and the United Kingdom; all of which file(d) tax returns in those jurisdictions. With few exceptions, Delphax, is no longer subject to examinations by income tax authorities for tax years before 2015.

Delphax maintains a September 30 fiscal year end and DSI maintains a March 31 fiscal year end. The returns for the fiscal years ended September 30, 2020 and March 31, 2021 have not yet been filed. Included in the deferred tax balances above and related to the Delphax entities are estimated foreign and U.S. federal loss carryforwards of $6.1 million and $8.5 million, respectively. The net operating losses expire in varying amounts beginning in the tax year 2027.

The provisions of ASC 740 require an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets will be recovered. In accounting for the Delphax entities' tax attributes, the Company has established a full valuation allowance of $5.0 million at March 31, 2021, and $4.8 million at March 31, 2020. The cumulative tax losses incurred by the Delphax entities in recent years was the primary basis for the Company’s determination that a full valuation allowance should be established against the Delphax entities’ net deferred tax assets.

The Company continues to assert that it will permanently reinvest any foreign earnings of DSI in a foreign country and will not repatriate those earnings back to the U.S. As a result of its permanent reinvestment assertion, the Company has not recorded deferred taxes related to DSI under the indefinite exception.