Income Taxes

The Company files a consolidated federal and various state income tax returns. The provision for income taxes is as follows:

	2019			2018
	(In thousands)
Current:
Federal	$	(283	)	$	(1,901	)
State		93			352
Total		(190	)		(1,549	)

Deferred:
Federal	$	1,220		$	(5,560	)
State		(310	)		(117	)
Total		910			(5,677	)
Total income taxes (1)	$	720		$	(7,226	)

(

) Income tax expense (benefit) included in the financial statements is comprised of (

$12.8

) million and (

$1.3

) million from continuing operations and

$13.5

million and (

$5.9

) million from discontinued operations in

2019

and

2018,

respectively.

A reconciliation for continuing operations of the expected U.S. statutory rate to the effective rate follows:

	2019			2018
Computed (expected tax rate)		21.0	%		31.5	%
State income taxes (net of federal tax benefit)		3.2			2.9
State tax credits		0.7			(4.8	)
Federal credits		1.0			(6.8	)
Manufacturer’s deduction		-			0.4
Addition to uncertain tax positions		1.0			2.0
Difference between statutory and actual rate		-			(10.5	)
Other permanent differences not deductible		(0.2	)		(3.7	)
Change in valuation allowance		(0.2	)		22.6
Return to provision federal		(0.1	)		(4.5	)
Tax rate change		-			(42.1	)
Other		(0.5	)		(2.1	)
Effective income tax rate		25.9	%		(15.1	)%

The effective tax rate for continuing operations was

25.9%

2019

and (

15.1

)% in

2018.

The increase of

41.0

percentage points in the effective tax rate for the year is the result of the change in income tax rate resulting from the Tax Cuts and Jobs Act. The change in income tax rate resulted in a

42.1

percentage point decrease in the

2018

tax rate and it did

not

impact the

2019

income tax rate.

December 22, 2017,

the President of the United States signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant changes in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from

31.5%

for the Company's fiscal

2018

and then down to

21%

starting in fiscal

2019.

As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the rate in effect during their scheduled reversal. This revaluation resulted in a benefit of

$3.3

million to income tax expense and a corresponding reduction in the net deferred tax liability as of

March 31, 2018.

The other provisions of the Tax Cuts and Jobs Act did

not

have a material impact on the fiscal

2018

consolidated financial statements.

The following is a summary of the significant components of the Company's deferred income tax assets and liabilities as of

March 31:

	2019		2018
	(In thousands)
Deferred income tax assets:
Future tax credits	$	5,124	$	5,030
Restructuring reserve		1,071		2,374
Employee benefits		2,030		2,440
Insurance		312		361
Other comprehensive loss		6,250		8,500
Interest		12		31
Future federal tax credits		654		443
Prepaid revenue		528		403
Other		298		714
Net operating loss and other tax attribute carryovers		5,628		4,512
Total assets		21,907		24,808
Deferred income tax liabilities:
Property basis and depreciation difference		13,049		11,750
Inventory valuation		534		964
Intangibles		286		325
Pension		1,633		2,328
Total liabilities		15,502		15,367
Valuation allowance - non-current		3,988		3,865
Net deferred income tax asset	$	2,417	$	5,576

Net non-current deferred income tax assets of

$2.4

million as of

March

31,

2019

and

$5.6

million as of

March

31,

2018

are recognized in the Consolidated Balance Sheets.

The Company has State tax credit carryforwards amounting to

$1.5

million (California, net of Federal impact),

$1.5

million (New York, net of Federal impact), and

$2.2

million (Wisconsin, net of Federal impact), which are available to reduce future taxes payable in each respective state through

2034

(Wisconsin), through

2034

(New York), and through

2028

(California). The Company has performed the required assessment regarding the realization of deferred tax assets and at

March

31,

2019,

the Company has recorded a valuation allowance amounting to

$4.0

million, which relates primarily to tax credit carryforwards which management has concluded it is more likely than

not

they will

not

all be realized in the ordinary course of operations. Although realization is

not

assured, management has concluded that it is more likely than

not

that the deferred tax assets for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations. The amount of net deferred tax assets considered realizable, however, could be reduced if actual future income or income taxes rates are lower than estimated or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

Current rules on the accounting for uncertainty on income taxes prescribe a minimum recognition threshold for a tax position taken or expected to be taken in a tax return that is required to be met before being recognized in the financial statements. Those rules also provide guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company classifies the liability for uncertain tax positions in other accrued expenses or other long-term liabilities depending on their expected settlement. The change in the liability for the years ended

March

31,

2019

and

2018

consists of the following:

	2019			2018
	(In thousands)
Beginning balance	$	855		$	715

Tax positions related to current year:
Additions		26			9

Tax positions related to prior years:
Additions		-			154
Reductions		(2	)		(23	)
Lapses in statues of limitations		(483	)		-
Balance as of March 31,	$	396		$	855

Neither balances at

March

31,

2019

nor

2018

include tax positions that are highly certain but for which there is uncertainty about the timing. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these positions would

not

impact the annual effective tax rate but would accelerate the payment of cash to the tax authority to an earlier period.

The Company recognizes interest and penalties accrued on unrecognized tax benefits as well as interest received from favorable settlements within income tax expense. During the years ended

March

31,

2019

and

2018,

the Company recognized approximately

$0.1

million decrease and

$0.0

million, respectively, in interest and penalties. As of

March

31,

2019

and

2018,

the Company had approximately

$0.0

million and

$0.1

million, respectively, of interest and penalties accrued associated with unrecognized tax benefits.

Although management believes that an adequate provision has been made for uncertain tax positions, there is the possibility that the ultimate resolution could have an adverse effect on the earnings of the Company. Conversely, if resolved favorably in the future, the related provisions would be reduced, thus having a positive impact on earnings. During

2019,

the statute of limitations lapsed on a number of uncertain tax positions and the lapse results in the positions

longer being uncertain. Therefore, in accordance with its accounting policies, the Company recorded a decrease to the liability and a decrease to tax expense of

$0.5

million.

The federal income tax returns for years after

March 31, 2015

are subject to examination.