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Note 13 - Income Taxes
 3 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

13. Income Taxes

 

The Company recorded income tax expense of $0.2 million in both the three months ended June 30, 2025 and 2024.

 

On July 4, 2025, the reconciliation bill, commonly referred to as the One Big Beautiful Bill (OBBB) was signed into law, which includes a broad range of tax reform provisions that may affect the company's financial results. The OBBB allows an elective deduction for domestic Research and Development (R&D), a reinstatement of elective 100% first-year bonus depreciation, and a more favorable tax rate on Foreign-derived Deduction Eligible Income and income from non-U.S. subsidiaries (Net CFC Tested Income), among other provisions. The Company is currently evaluating the impact of these provisions which could affect the Company's effective tax rate and deferred tax assets in 2025 and future periods. A quantitative estimate of the specific financial effects cannot be reasonably determined at this time due to the complexity of the changes in the tax reform. The impact of those tax provisions in the OBBB will depend on our facts in each year and anticipated guidance from the U.S. Department of the Treasury.

 

Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company re-evaluates these uncertain tax positions on a quarterly basis. The evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The Company did not identify any uncertain tax positions in the three months ended  June 30, 2025 and did not have any gross unrecognized tax benefits as of June 30, 2025.

 

On a quarterly basis, the Company reassesses the valuation allowance on deferred income tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. As of June 30, 2025, the Company continues to maintain a valuation allowance to reduce the U.S. federal and state deferred tax assets to the amount that will more likely than not be realized. Given the Company’s positive trend in earnings, the Company will assess during fiscal year 2025 whether sufficient positive evidence will exist to allow the Company to reach a conclusion that some or all of the U.S. valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of deferred tax assets and a corresponding decrease to income tax expense in the period the release is recorded, the effect of which would be an increase in reported net income.