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Note 7 - Federal, State and Local Income Taxes | 12 Months Ended
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Apr. 30, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
Note 7 - 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:
|  | Fiscal Years Ended April 30, |
($ in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Current tax expense: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,964 |  |  | $ | 3,853 |  |  | $ | 6,360 |
State and local |  |  | 600 |  |  |  | 365 |  |  |  | 469 |
Current tax expense |  |  | 3,564 |  |  |  | 4,218 |  |  |  | 6,829 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (650 | ) |  |  | (7,021 | ) |  |  | (1,299 | )
State and local |  |  | 1,162 |  |  |  | (37 | ) |  |  | (412 | )
Deferred tax expense (benefit): |  |  | 512 |  |  |  | (7,058 | ) |  |  | (1,711 | )
Income tax provision |  | $ | 4,076 |  |  | $ | (2,840 | ) |  | $ | 5,118 |
On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act (the "Tax Act"), was enacted. The Tax Act lowered the U.S. federal income tax rate ("Federal Tax Rate") from 35% to 21% effective January 1, 2018. Accordingly, the Company computes Federal income tax expense for the twelve months ended April 30, 2019 using the Federal Tax Rate of 21%, and computed its income tax expense for the twelve months ended April 30, 2018 using a blended Federal Income tax rate of 30.33%. The 21% Federal Tax Rate applies to the full 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 twelve months ended April 30, 2019, April 30, 2018 and April 30, 2017 were 26.81%, ( 23.87% ) and 33.05%, respectively. The overall change in the effective Federal tax rate during the twelve months ended April 30, 2019 and April 30, 2018 is primarily a result of the reduced Federal Tax Rate. As mentioned above, in fiscal 2018 the U.S. statutory federal corporate income tax rate was reduced from 35% to 21%, which resulted 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 and allocated it directly to both current and deferred income tax expenses from continuing operations. In addition, due to evolving state tax legislation, the Company's state and local effective income tax rate, net of Federal income tax benefit, increased from 0.7% of pretax income for the twelve months ended April 30, 2018, to 6.02% of pretax income for the twelve months ended April 30, 2019. The fluctuation in the effective income tax rate during fiscal 2017 is primarily attributable to the attribution of 100% of the gain on the sale of the Company's operating facility to one tax jurisdiction.
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:
|  | Fiscal Years Ended April 30, |
($ in thousands) |  | 2019 |  |  | 2018 |
Federal tax liability (benefit): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  | $ | 10,669 |  |  | $ | 10,658 |
Deferred non-cash post-employment compensation |  |  | (372 | ) |  |  | (372 | )
Depreciation and amortization |  |  | 130 |  |  |  | 119 |
Unrealized gain on securities held for sale |  |  | 446 |  |  |  | 208 |
Deferred charges |  |  | (354 | ) |  |  | (331 | )
Other |  |  | (279 | ) |  |  | 210 |
Total federal tax liability |  |  | 10,240 |  |  |  | 10,492 |
State and local tax liabilities (benefits): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  |  | 2,530 |  |  |  | 1,299 |
Deferred non-cash post-employment compensation |  |  | (74 | ) |  |  | (45 | )
Depreciation and amortization |  |  | 40 |  |  |  | 15 |
Other |  |  | (112 | ) |  |  | (47 | )
Total state and local tax liabilities |  |  | 2,384 |  |  |  | 1,222 |
Deferred tax liability, long-term |  | $ | 12,624 |  |  | $ | 11,714 |
The tax effect of temporary differences giving rise to the Company's long-term deferred tax liability is primarily a result of the federal, state and local taxes related to the $50,805,000 gain from deconsolidation of the Company's asset management and mutual fund distribution subsidiaries, partially offset by the long-term tax benefit related to the non-cash post-employment compensation of $1,770,000 granted to VLI's former employee.
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 pre-tax income as a result of the following:
|  | Fiscal Years Ended April 30, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
U.S. statutory federal tax rate |  |  | 21.00 | % |  |  | 30.33 | % |  |  | 35.00 | %
Increase (decrease) in tax rate from: |  |  |  |  |  |  |  |  |  |  |  |
Effect on deferred tax liabilities from federal tax rate reduction to 21% |  |  | - |  |  |  | -54.51 | % |  |  | - |
State and local income taxes, net of federal income tax benefit |  |  | 6.02 | % |  |  | 0.70 | % |  |  | -0.88 | %
Effect of dividends received deductions |  |  | -0.24 | % |  |  | -0.49 | % |  |  | -0.33 | %
Domestic production tax credit |  |  | - |  |  |  | - |  |  |  | -0.17 | %
Other, net |  |  | 0.03 | % |  |  | 0.10 | % |  |  | -0.57 | %
Effective income tax rate |  |  | 26.81 | % |  |  | -23.87 | % |  |  | 33.05 | %
The Company believes that, as of April 30, 2019, 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 2016 through 2018, 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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