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Income Taxes | 12 Months Ended
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Mar. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes For the year ended March 31, loss before income taxes consisted of the following:
(In thousands) |  |  | 2020 |  |  |  | 2019 |  |  |  | 2018 |
(Loss) before income taxes |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | (36,373 | ) |  | $ | (13,621 | ) |  | $ | (11,926 | )
Foreign |  |  | 2,507 |  |  |  | 678 |  |  |  | 325 |
Total loss before income taxes |  | $ | (33,866 | ) |  | $ | (12,943 | ) |  | $ | (11,601 | )
For the year ended March 31, income tax expense (benefit) consisted of the following:
(In thousands) |  |  | 2020 |  |  |  | 2019 |  |  |  | 2018 |
Income tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 59 |  |  | $ | 54 |  |  | $ | 66 |
State and local |  |  | 21 |  |  |  | (383 | ) |  |  | (446 | )
Foreign |  |  | 463 |  |  |  | 514 |  |  |  | 73 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 11 |  |  |  | 79 |  |  |  | (2,985 | )
State and local |  |  | 7 |  |  |  | 277 |  |  |  | 41 |
Foreign |  |  | (360 | ) |  |  | (320 | ) |  |  | — |
Total income tax expense (benefit) |  | $ | 201 |  |  | $ | 221 |  |  | $ | (3,251 | )
The following table presents the principal components of the difference between the effective tax rate to the U.S. federal statutory income tax rate for the years ended March 31:
(In thousands) |  | 2020 |  |  | 2019 |  |  | 2018 |
Income tax benefit at the US Federal statutory rate |  | $ | (7,112 | ) |  | $ | (2,718 | ) |  | $ | (3,654 | )
Benefit for state taxes |  |  | (856 | ) |  |  | (304 | ) |  |  | (642 | )
Impact of foreign operations |  |  | (514 | ) |  |  | (310 | ) |  |  | 38 |
Indefinite life assets |  |  | 19 |  |  |  | 130 |  |  |  | 335 |
Change in valuation allowance |  |  | 8,406 |  |  |  | 3,302 |  |  |  | 3,328 |
Change in liability for unrecognized tax benefits |  |  | 22 |  |  |  | (400 | ) |  |  | 40 |
Impact of Tax Act, net |  |  | — |  |  |  | 226 |  |  |  | (3,287 | )
Share-based compensation |  |  | (312 | ) |  |  | 2 |  |  |  | 476 |
Global intangible low-taxed income |  |  | 460 |  |  |  | 94 |  |  |  | — |
Other |  |  | 88 |  |  |  | 199 |  |  |  | 115 |
Total income tax expense (benefit) |  | $ | 201 |  |  | $ | 221 |  |  | $ | (3,251 | )
We have elected to account for global intangible low-taxed income (GILTI) inclusions in the period in which they are incurred. Our tax provision includes a provision for income taxes in certain foreign jurisdictions where subsidiaries are profitable, but only a minimal benefit is reflected related to U.S. and certain foreign tax losses due to the uncertainty of the ultimate realization of future benefits from these losses. The fiscal 2020 tax provision results primarily from foreign tax expense. The fiscal 2020 tax provision differs from the statutory rate primarily due to the recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, state taxes and other U.S. permanent book to tax differences. The fiscal 2019 tax provision primarily results from foreign tax expense, the reversal of reserves for uncertain tax positions and the completion of our accounting for the Tax Act. The fiscal 2019 effective rate differs from the statutory rate primarily due to the impact of the Tax Act, recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects. Deferred tax assets and liabilities as of March 31, are as follows:
(In thousands) |  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued liabilities |  | $ | 3,059 |  |  | $ | 3,944 |
Allowance for doubtful accounts |  |  | 331 |  |  |  | 120 |
Inventory valuation reserve |  |  | — |  |  |  | 41 |
Federal losses and credit carryforwards |  |  | 47,218 |  |  |  | 44,811 |
Foreign losses and credit carryforwards |  |  | 1,523 |  |  |  | 1,146 |
State losses and credit carryforwards |  |  | 10,911 |  |  |  | 9,886 |
Deferred revenue |  |  | 582 |  |  |  | 488 |
Property and equipment and software amortization |  |  | 163 |  |  |  | — |
Operating lease liabilities |  |  | 1,297 |  |  |  | — |
Goodwill and other intangible assets |  |  | 4,914 |  |  |  | — |
Other |  |  | 88 |  |  |  | 65 |
|  |  | 70,086 |  |  |  | 60,501 |
Less: valuation allowance |  |  | (66,819 | ) |  |  | (57,852 | )
Total |  |  | 3,267 |  |  |  | 2,649 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Operating lease right-of-use assets |  |  | (948 | ) |  |  | — |
Property and equipment and software amortization |  |  | — |  |  |  | (361 | )
Goodwill and other intangible assets |  |  | (2,426 | ) |  |  | (2,706 | )
Other |  |  | (9 | ) |  |  | — |
Total |  |  | (3,383 | ) |  |  | (3,067 | )
Total deferred tax liabilities |  | $ | (116 | ) |  | $ | (418 | )
At March 31, 2020, we had $199.1 million of federal net operating loss carryforwards that expire, if unused, in fiscal years 2031 to 2038, and $24.7 million of federal net operating loss carryforwards that can be carried forward indefinitely. Our Hong Kong, Malaysia, and Singapore subsidiaries have $0.4 million, $0.1 million, and $0.3 million of net operating loss carryforwards, respectively. The losses for Hong Kong, Malaysia and Singapore can be carried forward indefinitely. At March 31, 2020, our India subsidiary had $0.8 million of minimum alternative tax credits reported as other noncurrent assets on our Consolidated Balance Sheet. Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”. One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first 5 years of operations which includes fiscal 2018 through fiscal 2022. The India subsidiary is then subject to 50% of regular India income taxes during the second five years of operations which includes fiscal 2023 through fiscal 2027. The aggregate value of the benefit of the SEZ during the current fiscal year is $0.8 million. At March 31, 2020 we also had $141.6 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2021 through 2040. We recorded valuation allowances related to certain deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. At March 31, 2020, the total valuation allowance against deferred tax assets of $66.8 million was comprised of $65.9 million for federal and state deferred tax assets, and $0.9 million associated with deferred tax assets in Hong Kong, Malaysia, Singapore and the Philippines. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some, or all, of the deferred tax assets will not be realized. We have recorded a valuation allowance offsetting substantially all of our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, we will need to generate future taxable income before the expiration of the deferred tax assets governed by the tax code. Because of our losses in current and prior periods, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences. The amount of the valuation allowance, however, could be reduced in the near term. The exact timing will be based on the level of profitability that we are able to achieve and our visibility into future results. Our recorded tax rate may increase in subsequent periods following a valuation release. Any valuation allowance release will not affect the amount of cash paid for income taxes. The undistributed earnings of our foreign subsidiaries are not subject to U.S. federal and state income taxes unless such earnings are distributed in the form of dividends or otherwise to the extent of current and accumulated earnings and profits. The undistributed earnings of foreign subsidiaries are permanently reinvested and totaled $6.3 million and $3.1 million as of March 31, 2020 and 2019, respectively. We made the determination of permanent reinvestment on the basis of sufficient evidence that demonstrates we will invest the undistributed earnings overseas indefinitely for use in working capital, as well as foreign acquisitions and expansion. The determination of the amount of the unrecognized deferred U.S. income tax liability related to the undistributed earnings is not practicable. We recorded a liability for unrecognized tax positions. The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the years ended March 31:
(In thousands) |  | 2020 |  |  | 2019 |  |  | 2018 |
Balance at April 1 |  | $ | 580 |  |  | $ | 687 |  |  | $ | 988 |
Reductions: |  |  |  |  |  |  |  |  |  |  |  |
Relating to positions taken during prior year |  |  | — |  |  |  | — |  |  |  | (300 | )
Relating to lapse in statute |  |  | (5 | ) |  |  | (107 | ) |  |  | (1 | )
Balance at March 31 |  | $ | 575 |  |  | $ | 580 |  |  | $ | 687 |
As of March 31, 2020, we had a liability of $0.6 million related to uncertain tax positions, the recognition of which would affect our effective income tax rate. Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months an immaterial reduction in unrecognized tax benefits may occur as a result of the expiration of various statutes of limitations. We are consistently subject to tax audits; due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time. We recognize interest accrued on any unrecognized tax benefits as a component of income tax expense. Penalties are recognized as a component of general and administrative expenses. We recognized interest and penalty expense of less than $0.1 million for the years ended March 31, 2020, 2019 and 2018. As of March 31, 2020 and 2019, we had approximately $0.5 million and $0.5 million, respectively, of interest and penalties accrued in other non-current liabilities on our Consolidated Balance Sheets. In the U.S. we file consolidated federal and state income tax returns where statutes of limitations generally range from three to five years. Although we have resolved examinations with the IRS through tax year ended March 31, 2010, U.S. federal tax years are open from 2006 forward due to attribute carryforwards. The statute of limitations is open from fiscal year 2013 forward in certain state jurisdictions. We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years. Years beginning after 2009 are open for examination by certain foreign taxing authorities. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act includes provisions addressing the carryback of net operating losses for specific periods, refunds of alternative minimum tax credits, temporary modification to the limitation placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property. Additionally, the CARES Act provides, among other provisions, for the deferral of the employer-paid portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022; the CARES Act also provides for certain employee retention tax credits. As of March 31, 2020, these provisions are expected to provide us with approximately $0.1 million of additional liquidity during the current year due to the ability to accelerate outstanding alternative minimum tax credit refunds. Due to the net loss position of the Company, we do not anticipate impacts from net loss carryback or deductibility provisions. We are currently deferring the employer-paid portion of social security taxes but do not currently anticipate qualifying for employee retention tax credits at this time. Separate from the CARES Act, the IRS extended the dates for estimated tax payments for the first and second calendar quarters of 2020 to July 15, 2020. Further, many states are offering similar deferrals of various classes of tax payments. Due to the net loss position of the Company, we do not anticipate material federal or state tax payment deferrals. Significant uncertainty exists regarding the magnitude and duration of the impact of the COVID-19 pandemic; therefore, we cannot predict at this time the ultimate extent of its impact on our business operations, financial results and resulting effects to income taxes in future periods. See Part II, Item 1A. of this Annual Report for further discussion regarding risks associated with the COVID-19 pandemic.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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