Income Taxes

12 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

7.  Income Taxes

The Company files a consolidated federal income tax return and various state income tax returns. The amount of income taxes we record requires the interpretation of complex rules and regulations of federal and state taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2011. In January 2014, the Company was notified by the Internal Revenue Service that it had been selected at random for a compliance research examination of fiscal year ending March 31, 2012.

Significant components of net deferred tax assets (liabilities) at March 31 are as follows:

	2014			2013
Deferred tax assets:
Percentage depletion carryforwards	$	1,463,834		$	1,336,630
Deferred stock-based compensation		29,475			24,003
Asset retirement obligation		298,089			252,158
Net operating loss		298,736			503,659
Derivative instruments		13,944
Other		9,673			3,237
		2,113,751			2,119,687
Deferred tax liabilities:
Excess financial accounting bases over tax bases of property and equipment		(2,972,200	)		(2,972,886	)
Net deferred tax liabilities	$	(858,449	)	$	(853,199	)

As of March 31, 2014, the Company has a statutory depletion carryforward of approximately $4,700,000, which does not expire. At March 31, 2014, the Company had a net operating loss carryforward for regular income tax reporting purposes of approximately $3,200,000, which will begin expiring in 2029. The Company's ability to use some of its net operating loss carryforwards and certain other tax attributes to reduce current and future U.S. federal taxable income is subject to limitations under the Internal Revenue Code.

The income tax provision consists of the following for years ended March 31, 2014, 2013 and 2012:

	2014			2013			2012
Current income tax expense	$	6,500		$	-		$	-
Deferred income tax expense (benefit)		5,250			(31,504	)		(27,960	)
Total income tax provision:	$	11,750		$	(31,504	)	$	(27,960	)
Effective tax rate		4	%		(15	%)		(9	%)

The current income tax expense for fiscal year 2014 is the Company's anticipated alternative minimum tax that cannot offset with its alternative minimum tax net operating loss. The tax benefit from the net operating loss carryforward for the year ended March 31, 2014 was approximately $205,000." 

A reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for years ended March 31 follows:

	2014			2013			2012
Tax expense at federal statutory rate (1)	$	106,374		$	(70,678	)	$	102,691
Statutory depletion carryforward		(127,204	)		-			(155,734	)
Effect of graduated rates		(13,841	)		3,391			(16,940	)
Revision of prior year estimates		-			-			4,314
Permanent differences		46,421			35,783			30,210
Other		-			-			7,499
Total income tax expense (benefit)	$	11,750		$	(31,504	)	$	(27,960	)
Effective income tax rate		4	%		(15	%)		(9	%)

(1) The federal statutory rate was 34% for fiscal years ending March 31, 2014, 2013 and 2012.

For the years ended March 31, 2014, 2013 and 2012, the Company did not have any uncertain tax positions.

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

	2014		2013		2012
Unrecognized tax benefits at beginning of period	$	677,000	$	677,000	$	670,000
Additions based on tax positions related to the current year		2,000		-		-
Changes to tax positions of prior years		-		-		7,000
Settlements		-		-		-
Expirations		-		-		-
Unrecognized tax benefits at end of period	$	679,000	$	677,000	$	677,000

While the amount of unrecognized tax benefits may change in the next 12 months, the Company does not expect any change to have a significant impact on its results of operations. The recognition of the total amount of the unrecognized tax benefits would have an impact on the effective tax rate. If these unrecognized tax benefits are disallowed, the Company will be required to pay additional taxes.