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Note 8 - Income Taxes | 12 Months Ended
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Mar. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 8. Income Taxes
The Company files a consolidated federal and various state income tax returns. The provision for income taxes is as follows:
|  | 2020 |  |  | 2019 |
|  | (In thousands) |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (1,912 | ) |  | $ | (283 | )
State |  |  | 1,187 |  |  |  | 93 |
Total |  |  | (725 | ) |  |  | (190 | )
Deferred: |  |  |  |  |  |  |  |
Federal |  | $ | 14,251 |  |  | $ | 1,220 |
State |  |  | 1,278 |  |  |  | (310 | )
Total |  |  | 15,529 |  |  |  | 910 |
Total income taxes (1) |  | $ | 14,804 |  |  | $ | 720 |
( 1 ) Income tax expense (benefit) included in the financial statements is comprised of $14.4 million and $( 12.8 ) million from continuing operations and $0.4 million and $13.5 million from discontinued operations in 2020 and 2019, respectively.
A reconciliation for continuing operations of the expected U.S. statutory rate to the effective rate follows:
|  | 2020 |  |  | 2019 |
Computed (expected tax rate) |  |  | 21.0 | % |  |  | 21.0 | %
State income taxes (net of federal tax benefit) |  |  | 3.6 |  |  |  | 3.2 |
State tax credits |  |  | (0.8 | ) |  |  | 0.7 |
Federal credits |  |  | (0.8 | ) |  |  | 1.0 |
Addition to uncertain tax positions |  |  | 0.3 |  |  |  | 1.0 |
Other permanent differences not deductible |  |  | 0.2 |  |  |  | (0.2 | )
Change in valuation allowance |  |  | 0.7 |  |  |  | (0.2 | )
Tax law change |  |  | (2.8 | ) |  |  | - |
Other |  |  | 0.6 |  |  |  | (0.6 | )
Effective income tax rate |  |  | 22.0 | % |  |  | 25.9 | %
The effective tax rate was 22.0% in 2020 and 25.9% in 2019. The decrease of 3.9 percentage points in the effective tax rate for the year is primarily the result of two items. The changes in tax law from the CARES Act and the retroactive extension of the alternative fuel tax credit resulted in a 2.8 percentage point decrease. The creation of federal tax credits resulted in a 1.8 percentage point decrease. The amounts of federal credits are similar to the prior year but they have an opposite effect on the effective tax rate due to the company having income in 2020 and a loss in 2019. On December 20, 2019 PL 116 - 94 was enacted. This PL retroactively extended the Alternative Fuel Credit from the previous expiration date of December 31, 2017 to December 31, 2020. As a result, the Company qualified to take the alternative fuel tax credit from January 1, 2018 to March 31, 2019 in 2020. This resulted in a benefit of $0.13 million in 2020. On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted. The act allows companies to carryback certain net operating losses (NOL) and it changed how the business interest expense limitation is calculated allowing companies to decrease their limit. As a result, the Company was able to carryback NOLs recorded on their financial statement at a 21% tax rate to the 2015 tax year when the tax rate is 35%. This resulted in a benefit of $1.7 million in 2020. The following is a summary of the significant components of the Company's deferred income tax assets and liabilities as of March 31:
|  | 2020 |  |  | 2019 |
|  | (In thousands) |
Deferred income tax assets: |  |  |  |  |  |  |  |
Future tax credits |  | $ | 5,581 |  |  | $ | 5,124 |
Inventory valuation |  |  | 163 |  |  |  | - |
Restructuring reserve |  |  | 220 |  |  |  | 1,071 |
Employee benefits |  |  | 2,219 |  |  |  | 2,030 |
Insurance |  |  | 616 |  |  |  | 312 |
Other comprehensive loss |  |  | 26,562 |  |  |  | 6,250 |
Interest |  |  | 24 |  |  |  | 12 |
Future federal tax credits |  |  | - |  |  |  | 654 |
Prepaid revenue |  |  | 565 |  |  |  | 528 |
Other |  |  | 186 |  |  |  | 298 |
Net operating loss and other tax attribute carryovers |  |  | 2,233 |  |  |  | 5,628 |
Total assets |  |  | 38,369 |  |  |  | 21,907 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Property basis and depreciation difference |  |  | 12,664 |  |  |  | 13,049 |
Inventory valuation |  |  | - |  |  |  | 534 |
Intangibles |  |  | 208 |  |  |  | 286 |
Income from equity investment |  |  | 1,239 |  |  |  | - |
Right of use assets |  |  | 4,373 |  |  |  | - |
Pension |  |  | 7,540 |  |  |  | 1,633 |
Total liabilities |  |  | 26,024 |  |  |  | 15,502 |
Valuation allowance - non-current |  |  | 4,473 |  |  |  | 3,988 |
Net deferred income tax asset |  | $ | 7,872 |  |  | $ | 2,417 |
Net non-current deferred income tax assets of $7.9 million as of March 31, 2020 and net non-current deferred income tax assets of $2.4 million as of March 31, 2019 are recognized in the Consolidated Balance Sheets. The Company has State tax credit carryforwards amounting to $1.5 million (California, net of Federal impact), $1.9 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, 2020, the Company has recorded a valuation allowance amounting to $4.5 million, which relates primarily to tax credit carryforwards which management has concluded it is more likely than not they will not 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, 2020 and 2019 consists of the following:
|  | 2020 |  |  | 2019 |
|  | (In thousands) |
Beginning balance |  | $ | 396 |  |  | $ | 855 |
Tax positions related to current year: |  |  |  |  |  |  |  |
Additions |  |  | 1,123 |  |  |  | 26 |
Tax positions related to prior years: |  |  |  |  |  |  |  |
Additions |  |  | 569 |  |  |  | - |
Reductions |  |  | (16 | ) |  |  | (2 | )
Lapses in statues of limitations |  |  | (7 | ) |  |  | (483 | )
Balance as of March 31, |  | $ | 2,065 |  |  | $ | 396 |
As of March 31, 2020 and 2019 unrecognized tax benefits include $1.6 million and $0.0 million of 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, 2020 and 2019, the Company recognized approximately $0.2 million increase and $0.1 million decrease, respectively, in interest and penalties. As of March 31, 2020 and 2019, the Company had approximately $0.2 million and $0.0 million of interest and penalties accrued, respectively, associated with unrecognized tax benefits. Although management believes that an adequate position 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 2020 the statute of limitations lapsed on one uncertain tax position. The lapse resulted in the position no longer being uncertain. As a result of the statute of limitations lapse and in accordance with its accounting policies, the Company recorded a decrease to the liability and a decrease to tax expense of $0.0 million. The federal income tax returns for years after March 31, 2016 are subject to examination. The tax year ended March 31, 2017 is currently under audit with the IRS.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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