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Note 8 - Federal, State and Local Income Taxes | 3 Months Ended
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Jul. 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 July 31, |
($ in thousands) |  | 2018 |  |  | 2017 |
Current tax expense: |  |  |  |  |  |  |  |
Federal |  | $ | 734 |  |  | $ | 1,319 |
State and local |  |  | 88 |  |  |  | 79 |
Current tax expense |  |  | 822 |  |  |  | 1,398 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | (186 | )
State and local |  |  | (271 | ) |  |  | (30 | )
Deferred tax expense (benefit): |  |  | (271 | ) |  |  | (216 | )
Income tax provision |  | $ | 551 |  |  | $ | 1,182 |
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 computed Federal income tax expense for the fiscal quarter ended July 31, 2018 using the Federal Tax Rate of 21%. The 21% Federal Tax Rate applies to the fiscal year ending April 30, 2019 and each year thereafter.
The overall effective income tax rates, as a percentage of pre-tax ordinary income for the three months ended July 31, 2018 and July 31, 2017 were 15.07% and 34.80%, respectively. The decline in the overall effective tax rate during the quarter ended July 31, 2018 is primarily a result of a decline in Federal Tax Rate and a decrease in the state and local allocation factors on the deferred tax on the unrealized gain from deconsolidation of EAM. In fiscal 2018 the U.S. statutory federal corporate income tax rate was reduced from 35% to 21% on the Company’s long-term deferred tax liabilities, resulting in a tax benefit of 54.51% of pre-tax income for the twelve months ended April 30, 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 was reflected entirely in the third quarter ended January 31, 2018 ( the period that included the enactment date) and was 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:
|  | July 31, |  |  | April 30, |
($ in thousands) |  | 2018 |  |  | 2018 |
Federal tax liability (benefit): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  | $ | 10,660 |  |  | $ | 10,658 |
Deferred non-cash post-employment compensation |  |  | (372 | ) |  |  | (372 | )
Depreciation and amortization |  |  | 108 |  |  |  | 119 |
Unrealized loss (gain) on securities held for sale |  |  | 321 |  |  |  | 208 |
Deferred charges |  |  | (182 | ) |  |  | (331 | )
Other |  |  | 72 |  |  |  | 210 |
Total federal tax liability |  |  | 10,607 |  |  |  | 10,492 |
State and local tax liabilities (benefits): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  |  | 1,027 |  |  |  | 1,299 |
Deferred non-cash post-employment compensation |  |  | 36 |  |  |  | (45 | )
Depreciation and amortization |  |  | 10 |  |  |  | 15 |
Other |  |  | (107 | ) |  |  | (47 | )
Total state and local tax liabilities |  |  | 966 |  |  |  | 1,222 |
Deferred tax liability, long-term |  | $ | 11,573 |  |  | $ | 11,714 |
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:
|  | Three Months Ended July 31, |
|  | 2018 |  |  | 2017 |
U.S. statutory federal tax rate |  |  | 21.00 | % |  |  | 35.00 | %
Increase (decrease) in tax rate from: |  |  |  |  |  |  |  |
State and local income taxes, net of federal income tax benefit |  |  | -5.70 | % |  |  | 0.73 | %
Effect of dividends received deductions |  |  | -0.27 | % |  |  | -0.37 | %
Domestic production tax credit |  |  | - |  |  |  | -0.65 | %
Other, net |  |  | 0.04 | % |  |  | 0.09 | %
Effective income tax rate |  |  | 15.07 | % |  |  | 34.80 | %
The Company believes that, as of July 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, and files combined income tax returns with the Parent on a unitary basis in certain states. 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 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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