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Note 4 - Income Taxes
 12 Months Ended
Mar. 25, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 4 – INCOME TAXES

 

Transcat’s income before income taxes on the Consolidated Statements of Income is as follows (amounts in thousands):

 

  

FY 2023

  

FY 2022

  

FY 2021

 

United States

 $9,879  $10,417  $9,187 

Foreign

  3,608   2,773   795 

Total

 $13,487  $13,190  $9,982 

 

The provision for income taxes for fiscal years 2023, 2022 and 2021 is as follows:

 

  

FY 2023

  

FY 2022

  

FY 2021

 

Current Tax Provision:

            

Federal

 $1,938  $414  $1,449 

State

  652   240   428 

Foreign

  395   752   103 
  $2,985  $1,406  $1,980 

Deferred Tax (Benefit) Provision:

            

Federal

 $(334) $456  $96 

State

  (258)  (10)  (22)

Foreign

  406   (42)  137 
  $(186) $404  $211 

Provision for Income Taxes

 $2,799  $1,810  $2,191 

 

A reconciliation of the income tax provision computed by applying the statutory U.S. federal income tax rate and the income tax provision reflected in the Consolidated Statements of Income is as follows (amounts in thousands):

 

  

FY 2023

  

FY 2022

  

FY 2021

 

Federal Income Tax at Statutory Rate

 $2,832  $2,770  $2,096 

State Income Taxes, net of federal benefit

  311   172   282 

Foreign Taxes and Federal, State and Foreign Tax Credits

  (56)  (127)  9 

Tax Impact of Equity Awards

  (416)  (1,395)  (274)

Non-Deductible Acquisition Costs

  6   206   - 

GILTI and 78 Gross Up

  83   161   - 

Other, net

  39   23   78 

Total

 $2,799  $1,810  $2,191 

 

  

March 25,

  

March 26,

 
  

2023

  

2022

 

Deferred Tax Assets:

        

Accrued Liabilities

 $362  $384 

Lease Liabilities

  1,916   2,622 

Performance-Based Stock Award Grants

  720   443 

Inventory Reserves

  70   100 

Non-Qualified Deferred Compensation Plan

  62   92 

Post-Retirement Health Care Plans

  323   333 

Stock-Based Compensation

  570   225 

Capitalized Inventory Costs

  214   158 

Other

  314   233 

Total Deferred Tax Assets

 $4,551  $4,590 
         

Deferred Tax Liabilities:

        

Goodwill and Intangible Assets

 $(3,504) $(3,812)

Right of Use Assets

  (1,957)  (2,623)

Depreciation

  (5,462)  (4,767)

Other

  (166)  (112)

Total Deferred Tax Liabilities

 $(11,089) $(11,314)
         

Net Deferred Tax Liabilities

 $(6,538) $(6,724)

 

The Company files income tax returns in the U.S. federal jurisdiction, various states, Canada and Ireland. The Company is no longer subject to examination by U.S. federal income tax authorities for fiscal years 2019 and prior, by state tax authorities for fiscal years 2017 and prior, by Canadian tax authorities for fiscal years 2017 and prior, and by Ireland tax authorities for calendar years 2018 and prior. There are no income tax years currently under examination by the Internal Revenue Service, Canadian and Irish tax authorities. One U.S. state has selected Transcat for analysis, the results of this analysis will determine if further action is required.  The Company's foreign subsidiary undistributed earnings are considered to be permanently reinvested.

 

During fiscal years 2023, 2022 and 2021, there were no uncertain tax positions. No interest or penalties related to uncertain tax positions were recognized in fiscal years 2023, 2022 and 2021 or were accrued at March 25, 2023 and March 26, 2022.

 

The Company’s effective tax rate for fiscal years 2023, 2022 and 2021 was 20.8%, 13.7% and 21.9%, respectively. The tax rate is affected by recurring items, such as state income taxes and tax credits, which the Company expects to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. The discrete benefits related to share-based compensation awards in each of fiscal years 2023, 2022 and 2021 were $0.4 million, $1.4 million and $0.3 million, respectively.

 

The Company expects to receive certain federal, state and Canadian tax credits in future years. The Company also expects to receive discrete tax benefits related to share-based compensation awards in fiscal year 2024. As such, it expects its effective tax rate in fiscal year 2024 to be between 21.0% and 23.0%.