Federal, State and Local Income Taxes

12 Months Ended

Apr. 30, 2014

Income Tax Disclosure [Abstract]

Federal, State and Local Income Taxes

Note 7-Federal, State and Local Income Taxes:

In accordance with the requirements of the Income Tax Topic of the FASB’s ASC, the Company’s provision for income taxes includes the following:

	Fiscal Years Ended April 30,
($ in thousands)	2014			2013		2012
Current tax expense (benefit):
Federal	$	2,707		$	2,679	$	139
State and local		239			130		(54	)
		2,946			2,809		85
Deferred tax expense (benefit):
Federal		572			728		3,785
State and local		(108	)		350		503
		464			1,078		4,288
Income tax provision:	$	3,410		$	3,887	$	4,373

Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The tax effect of temporary differences giving rise to the Company’s deferred tax asset and deferred tax liability are as follows:

	Fiscal Years Ended April 30,
($ in thousands)	2014			2013
Federal tax benefit (liability):
Unrealized gains on securities available-for-sale	$	(134	)	$	(136	)
Operating lease exit obligation		70			13
Deferred professional fees		36			49
Deferred charges		327			265
Total federal tax benefit		299			191
State and local tax benefits:
Other - deferred charges		65			36
Total state and local tax benefits		65			36
Deferred tax asset, short term	$	364		$	227
	Fiscal Years Ended April 30,
($ in thousands)	2014			2013
Federal tax liability (benefit):
Deferred gain on deconsolidation of EAM	$	17,679		$	17,679
Deferred non-cash post-employment compensation		(619	)		(619	)
Depreciation and amortization		2,416			1,642
Other		646			262
Total federal tax liability		20,122			18,964
State and local tax liabilities (benefits):
Deferred gain on deconsolidation of EAM		2,181			2,243
Deferred non-cash post-employment compensation		(76	)		(79	)
Depreciation and amortization		298			208
Deferred professional fees		(5	)		(10	)
Total state and local tax liabilities		2,398			2,362
Deferred tax liability, long term	$	22,520		$	21,326

The Company’s net operating loss carryforward from fiscal 2012 of approximately $360,000 was fully utilized during the twelve months ended April 30, 2013.

The Company’s net operating loss carryforward of approximately $7.3 million was mostly utilized during the twelve months ended April 30, 2012. The tax effect of temporary differences giving rise to the Company’s long term deferred tax liability is primarily a result of the federal, state, and local taxes related to the $50,510,000 gain from deconsolidation of the Company’s asset management and mutual fund distribution subsidiaries, partially offset by the long term tax benefit related to the non-cash post-employment compensation of $1,770,000 granted to VLI’s former employee recognized in fiscal 2011.

The Company uses the effective income tax rate determined to provide for income taxes on a year-to-date basis and reflects the tax effect of any tax law changes and certain other discrete events in the period in which they occur.

The overall effective income tax rates, as a percentage of pre-tax ordinary income for the twelve months ended April 30, 2014, 2013 and 2012 were 33.50%, 37.00% and 38.71%, respectively. The Company’s annual effective tax rate will change due to a number of factors including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-tax income, the Company’s geographic profit mix between tax jurisdictions, new tax laws, new interpretations of existing tax laws and rulings and settlements with tax authorities. The decrease in the effective income tax rate during fiscal 2014 is attributable to the lower percentage of income subject to state and local income taxes and a favorable settlement of a local income tax audit. The fluctuation in the effective income tax rate during fiscal 2013 is attributable to a higher percentage of income subject to state and local taxes offset by the recognition of the domestic production tax credits and an increase in the dividends received deduction during the current fiscal year. The change in the effective income tax rate in fiscal 2012 is attributable to the alternative minimum tax on the limitation to the Company’s net operating loss carryforward in fiscal years 2012, and a slight decrease in state and local tax rate for fiscal 2012 primarily from EAM’s geographical income allocation.

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate to pretax income as a result of the following:

	Fiscal Years Ended April 30,
	2014			2013			2012
U.S. statutory federal rate		35.00	%		35.00	%		35.00	%
Increase (decrease) in tax rate from:
State and local income taxes, net of federal income tax benefit		0.84	%		2.96	%		2.58	%
Effect of dividends received deductions		-0.33	%		-0.27	%		-
Alternative minimum tax - net operating loss limitation		-			-			1.23	%
Domestic production tax credit		-0.58	%		-0.52	%		-
Other, net		-1.43	%		-0.17	%		-0.10	%
Effective income tax rate		33.50	%		37.00	%		38.71	%

The Company believes that, as of April 30, 2014, there were no material uncertain tax positions that would require disclosure under GAAP.

The Company is included in the consolidated federal income tax return of the Parent. The Company has a tax sharing agreement which requires it to make tax payments to the Parent equal to the Company’s liability/(benefit) as if it filed a separate return.

The Company’s federal income tax returns (included in the Parent’s consolidated returns) and state and city tax returns for fiscal years 2013, 2012, and 2011 are subject to examination by the tax authorities, generally for three years after they were filed with the tax authorities. During May 2014, New York City concluded its examination of the Company’s income tax returns for the three years through fiscal year 2011, which resulted in no changes that had any adverse effect on the Company’s financial statements. The Company’s tax returns for the fiscal years ended April 30, 2013 and 2012 are being examined by the Internal Revenue Service (IRS). The Company does not expect the audit examination to have a material effect on its financial statements.