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Note 7 - Federal, State and Local Income Taxes | 12 Months Ended
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Apr. 30, 2023
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) |  | 2023 |  |  | 2022 |  |  | 2021 |
Current tax expense: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 4,702 |  |  | $ | 5,625 |  |  | $ | 5,407 |
State and local |  |  | 984 |  |  |  | 1,280 |  |  |  | 1,046 |
Current tax expense |  |  | 5,686 |  |  |  | 6,905 |  |  |  | 6,453 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 23 |  |  |  | 239 |  |  |  | 859 |
State and local |  |  | (3 | ) |  |  | (328 | ) |  |  | (316 | )
Deferred tax expense (benefit): |  |  | 20 |  |  |  | (89 | ) |  |  | 543 |
Income tax provision |  | $ | 5,706 |  |  | $ | 6,816 |  |  | $ | 6,996 |
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 using the Federal Tax Rate of 21% in fiscal year 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, 2023, April 30, 2022 and April 30, 2021 were 24.00%, 22.25% and 23.11%, respectively. The increase in the effective tax rate during for the twelve months ended April 30, 2023 as compared to April 30, 2022, is primarily a result of the non-taxable revenue derived from forgiveness of the PPP loan by the SBA (see note 19) in fiscal 2022 offset by an increase in the state and local income taxes from 3.12% to 3.25% as a result of changes in state and local income tax allocation factors, on deferred taxes in fiscal 2023. The Company's annualized overall effective tax rate fluctuates due to a number of factors, in addition to changes in tax law, including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-income tax, 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:
|  | Fiscal Years Ended April 30, |
($ in thousands) |  | 2023 |  |  | 2022 |
Federal tax liability (benefit): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  | $ | 10,669 |  |  | $ | 10,669 |
Deferred non-cash post-employment compensation |  |  | (372 | ) |  |  | (372 | )
Depreciation and amortization |  |  | 59 |  |  |  | 77 |
Unrealized gain on securities held for sale |  |  | 919 |  |  |  | 909 |
Right of Use Asset |  |  | (174 | ) |  |  | (188 | )
Deferred charges |  |  | (136 | ) |  |  | (154 | )
Other |  |  | (333 | ) |  |  | (300 | )
Total federal tax liability |  |  | 10,632 |  |  |  | 10,641 |
State and local tax liabilities (benefits): |  |  |  |  |  |  |  |
Deferred gain on deconsolidation of EAM |  |  | 2,062 |  |  |  | 2,131 |
Deferred non-cash post-employment compensation |  |  | (72 | ) |  |  | (74 | )
Depreciation and amortization |  |  | 125 |  |  |  | 180 |
Unrealized gain on securities held for sale |  |  | 178 |  |  |  | 194 |
Other |  |  | 204 |  |  |  | 54 |
Total state and local tax liabilities |  |  | 2,497 |  |  |  | 2,485 |
Deferred tax liability, long-term |  | $ | 13,129 |  |  | $ | 13,126 |
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, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
U.S. statutory federal tax rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
Increase (decrease) in tax rate from: |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal income tax benefit |  |  | 3.25 | % |  |  | 3.12 | % |  |  | 2.05 | %
Nontaxable SBA loan forgiveness |  |  | - |  |  |  | (1.60 | %) |  |  | - |
Effect of dividends received deductions |  |  | (0.26 | %) |  |  | (0.29 | %) |  |  | (0.31 | %)
Other, net |  |  | 0.01 | % |  |  | 0.02 | % |  |  | 0.37 | %
Effective income tax rate |  |  | 24.00 | % |  |  | 22.25 | % |  |  | 23.11 | %
The Company believes that, as of April 30, 2023, 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’s federal income tax returns (included in the Parent’s consolidated returns) and state and city tax returns for fiscal years ended 2020 through 2022, are subject to examination by the tax authorities, generally for three years after they are filed with the tax authorities.

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