Federal, State and Local Income Taxes

9 Months Ended

Jan. 31, 2014

Note 8 - Federal, State and Local Income Taxes:

In accordance with the requirements of the Income Tax Topic of the FASB’s ASC, the Company’s provision for income taxes includes the following:


	Three Months Ended January 31,					Nine Months Ended January 31,
($ in thousands)	2014			2013		2014		2013
Current tax expense:
Federal	$	949		$	727	$	2,003	$	2,054
State and local		66			156		140		258
Current tax expense		1,015			883		2,143		2,312

Deferred tax expense:
Federal		(9	)		97		521		533
State and local		20			23		111		140
Deferred tax expense		11			120		632		673
Income tax provision	$	1,026		$	1,003	$	2,775	$	2,985

Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The tax effect of temporary differences giving rise to the Company’s deferred tax asset and deferred tax liability are as follows:


	January 31,			April 30,
($ in thousands)	2014			2013
Federal tax benefit (liability):
Unrealized gains on securities available-for-sale	$	(110	)	$	(136	)
Operating lease deferred obligation		70			13
Deferred professional fees		39			49
Deferred charges		227			265
Total federal tax benefit		226			191

State and local tax benefits:
NYC UBT tax credit carryforward		181			-
Other		56			36
Total state and local tax benefits		237			36
Deferred tax asset, short term	$	463		$	227

	January 31,			April 30,
($ in thousands)	2014			2013
Federal tax liability (benefit):
Deferred gain on deconsolidation of EAM	$	17,679		$	17,679
Deferred non-cash post-employment compensation		(619	)		(619	)
Depreciation and amortization		2,359			1,642
Other		590			262
Total federal tax liability		20,009			18,964

State and local tax liabilities (benefits):
Deferred gain on deconsolidation of EAM		2,144			2,243
Deferred non-cash post-employment compensation		(75	)		(79	)
Depreciation and amortization		286			208
Deferred professional fees		(5	)		(10	)
Total state and local tax liabilities		2,350			2,362
Deferred tax liability, long term	$	22,359		$	21,326

At the end of each interim reporting period, the Company estimates the effective income tax rate to apply for the full fiscal year. The Company uses the effective income tax rate determined to provide for income taxes on a year-to-date basis and reflects the tax effect of any tax law changes and certain other discrete events in the period in which they occur.

The overall effective income tax rate, as a percentage of pre-tax ordinary income for the nine months ended January 31, 2014 and January 31, 2013 was 35.30% and 36.94%, respectively. The Company’s annual effective tax rate may change due to a number of factors including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-tax income, the Company’s geographic profit mix between tax jurisdictions, new tax laws, new interpretations of existing tax laws and rulings by and settlements with tax authorities. The fluctuation in the effective income tax rate during fiscal 2014 is primarily attributable to a lower percentage of income subject to state and local taxes and an increase in the dividends received deduction.

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate to pretax income as a result of the following:


	Nine Months Ended January 31,
	2014			2013
U.S. statutory federal rate		35.00	%		35.00	%
Increase (decrease) in tax rate from:
State and local income taxes, net of federal income tax benefit		1.97	%		2.78	%
Effect of dividends received deductions		-0.42	%		-0.26	%
Domestic production tax credit		-0.46	%		-0.58	%
Other, net		-0.79	%		-
Effective income tax rate		35.30	%		36.94	%

The Company believes that, as of January 31, 2014, there were no material uncertain tax positions that would require disclosure under GAAP.

The Company is included in the consolidated federal income tax return of the Parent. The Company has a tax sharing agreement which requires it to make tax payments to the Parent equal to the Company’s liability/(benefit) as if it filed a separate return.

The Company’s federal income tax returns (included in the Parent’s consolidated returns) and state and city tax returns for fiscal years 2011, 2012, and 2013 are subject to examination by the tax authorities, generally for three years after they were filed with the tax authorities. The Company’s tax returns for the fiscal years ended April 30, 2010 and 2011 are being examined by the City of New York. The Company’s federal income tax return for the fiscal year ended April 30, 2012 is being examined by the Internal Revenue Service. Each examination is at an early stage. The Company does not have reason to believe the audit examinations will have a material effect on its financial statements.

- 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.

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