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Note 8 - Federal, State and Local Income Taxes | 9 Months Ended
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Jan. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
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) |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Current tax expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 222 |  |  | $ | 851 |  |  | $ | 2,681 |  |  | $ | 5,424 |
State and local |  |  | 55 |  |  |  | 166 |  |  |  | 303 |  |  |  | 506 |
Current tax expense |  |  | 277 |  |  |  | 1,017 |  |  |  | 2,984 |  |  |  | 5,930 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (6,014 | ) |  |  | (282 | ) |  |  | (6,326 | ) |  |  | (870 | )
State and local |  |  | 70 |  |  |  | (326 | ) |  |  | (79 | ) |  |  | (387 | )
Deferred tax expense (benefit): |  |  | (5,944 | ) |  |  | (608 | ) |  |  | (6,405 | ) |  |  | (1,257 | )
Income tax provision |  | $ | (5,667 | ) |  | $ | 409 |  |  | $ | (3,421 | ) |  | $ | 4,673 |
On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the "Tax Act") was enacted. The Tax Act lowers the U.S. federal income tax rate ("Federal Tax Rate") from 35% to 21% effective January 1, 2018. Accordingly, the Company computes its income tax expense for the fiscal year ending April 30, 2018 using a blended Federal Tax Rate of 30.33%. The 21% Federal Tax Rate will apply to fiscal year ending April 30, 2019 and each year thereafter.
The overall effective income tax rate s, as a percentage of pre-tax ordinary income for the nine months ended January 31, 2018 and January 31, 2017 were ( 34.69% ) and 33.48%, respectively. The aforementioned reduction in the income tax rate results in a tax benefit of 65.87% of pre-tax income for the nine months ended January 31, 2018, primarily attributable to the effect on the long-term deferred tax liability. The Company re-calculated its net deferred tax assets and liabilities using the Federal Tax Rate under the Tax Act. The effect of the re-calculation is reflected entirely in the third quarter ended January 31, 2018 ( the period that includes the enactment date) and is allocated directly to both current and deferred income tax expenses from continuing operations. The Company's annualized overall effective tax rate fluctuates due to a number of factors, in addition to the new tax law, 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, taxation method adopted by each locality, new interpretations of existing tax laws and rulings and settlements with tax authorities.
Deferred income taxes, a liability, 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 long-term deferred tax liability are as follows:
|  | January 31, |  |  | April 30, |
($ in thousands) |  | 2018 |  |  | 2017 |
Federal tax liability (benefit): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  | $ | 10,655 |  |  | $ | 17,742 |
Deferred non-cash post-employment compensation |  |  | (372 | ) |  |  | (619 | )
Depreciation and amortization |  |  | 179 |  |  |  | 454 |
Unrealized loss (gain) on securities held for sale |  |  | 322 |  |  |  | (366 | )
Other |  |  | (42 | ) |  |  | - |
Total federal tax liability |  |  | 10,742 |  |  |  | 17,211 |
State and local tax liabilities (benefits): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  |  | 1,298 |  |  |  | 1,206 |
Deferred non-cash post-employment compensation |  |  | (45 | ) |  |  | (42 | )
Depreciation and amortization |  |  | 22 |  |  |  | 31 |
Other |  |  | (45 | ) |  |  | (29 | )
Total state and local tax liabilities |  |  | 1,230 |  |  |  | 1,166 |
Deferred tax liability, long-term |  | $ | 11,972 |  |  | $ | 18,377 |
In November 2015, the FASB issued ASU 2015 - 17, Income taxes (Topic 740 ): Balance Sheet Classification of Deferred Taxes which requires that all deferred tax assets and liabilities, along with related valuation allowances, be classified as long-term on the balance sheet. As a result, each tax-paying jurisdiction will now only have one net long-term asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The Company implemented ASU 2015 - 17 in the first quarter of fiscal 2018 retroactively to include the results as of April 30, 2017 for comparative purposes. The adoption of ASU 2015 - 17 does not have a material impact on our consolidated condensed financial statements and related disclosures.
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 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, |
|  | 2018 |  |  | 2017 |
U.S. statutory federal tax rate |  |  | 30.33 | % |  |  | 35.00 | %
Increase (decrease) in tax rate from: |  |  |  |  |
Effect on deferred tax liabilities from federal tax rate reduction to 21% |  |  | -65.87 | % |  |  | - |
State and local income taxes, net of federal income tax benefit |  |  | 1.27 | % |  |  | -0.39 | %
Effect of dividends received deductions |  |  | -0.47 | % |  |  | -0.29 | %
Domestic production tax credit |  |  | -0.13 | % |  |  | -0.19 | %
Other, net |  |  | 0.18 | % |  |  | -0.65 | %
Effective income tax rate |  |  | -34.69 | % |  |  | 33.48 | %
The Company believes that, as of January 31, 2018, 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. Beginning with the fiscal year ended April 30, 2017, the Company files combined income tax returns with the Parent on a unitary basis in certain states as a result of changes in state tax regulations. The Company does not anticipate any significant tax implications from the change to unitary state tax filing.
The Company ’s federal income tax returns (included in the Parent’s consolidated returns) and state and city tax returns for fiscal years ended 2014 through 2017, are subject to examination by the tax authorities, generally for three years after they are filed with the tax authorities. The Company is presently engaged in a federal tax audit for the fiscal year ended April 30, 2015 and does not expect it to have a material effect on the financial statements.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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