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Note 12 - Income Taxes
 12 Months Ended
Mar. 31, 2022
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 12. Income Taxes

 

Earnings before income taxes are as follows:

 

  

Year Ended March 31,

 
  

2022

  

2021

  

2020

 

Domestic

 $4,579  $6,297  $16,059 

Foreign

  (1,005)  (3,994)  (12,197)

Total earnings before income taxes

 $3,574  $2,303  $3,862 

 

The components of our provision for income taxes are as follows:

 

  

Year Ended March 31,

 
  

2022

  

2021

  

2020

 

Current tax provision

            

U.S. Federal

 $(83) $1,500  $2,348 

U.S. State

  286   628   814 

Foreign

  1,372   404   993 

Total current tax expense

  1,575   2,532   4,155 

Deferred tax provision:

            

U.S. Federal

  1,707   (2,410)  60 

U.S. State

  337   (619)  599 

Foreign

  (1,916)  (474)  (2,730)

Total deferred tax expense

  128   (3,503)  (2,071)

Total income tax expense (benefit)

 $1,703  $(971) $2,084 

 

The components of net deferred tax assets and liabilities are as follows:

 

  

March 31, 2022

  

March 31, 2021

 

Deferred tax assets:

        

Net operating loss

 $11,274  $8,990 

Credits

  5,321   169 

Stock compensation deductible differences

  2,137   2,099 

Inventories

  1,316   838 

Allowances and reserves

  1,977   1,471 

Accrued employee-related expenses

  296   209 

Debt related

  91   -- 

Other

  7   25 

Total deferred tax assets

  22,419   13,801 

Deferred tax liabilities:

        

Goodwill and intangible assets

  (56,145)  (23,029)

Property, plant and equipment

  (3,284)  (1,275)

Debt

  --   (4,723)

Currency translation adjustment

  (185)  -- 

Other

  (3)  (29)

Total deferred tax liabilities

  (59,617)  (29,056)

Valuation allowance

  (708)  (404)

Net deferred tax (liability)

 $(37,906) $(15,659)

 

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:

 

  

Year Ended March 31,

 
  

2022

  

2021

  

2020

 

Federal income taxes at statutory rates

 $751  $483  $811 

State income taxes, net of federal benefit

  628   (221)  1,122 

Tax benefit of stock option exercises

  (4,055)  (1,816)  (1,576)

Foreign-derived intangible income deduction

  --   (999)  -- 

Research and development credit

  (495)  (165)  (191)

Interest reserve adjustment

  668   --   -- 

Limitation for 162(m)

  4,039   1,113   1,112 

Foreign rate differential

  152   810   657 

Other

  15   (176)  149 

Total income tax expense (benefit)

 $1,703  $(971) $2,084 

 

We or one of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our federal tax returns for all years after 2018, state tax returns after 2017 and foreign tax returns after 2017 are subject to future examination by tax authorities for all our tax jurisdictions. Although the outcome of tax audits, if any, is always uncertain, we believe that we have adequately accrued for all amounts of tax, including interest and penalties and any adjustments that may result. The tax year ended  December 31, 2018 for Gyros US, Inc., and its subsidiary (together "Gyros U.S."), which we acquired as part of the GPT Acquisition, is under examination by the IRS. Additionally, the tax year ended March 31, 2019 for Mesa Laboratories, Inc. is under review by the IRS. We expect the examinations for these tax years to be completed during the year ending March 31, 2023.

 

We recognize interest and penalties related to unrecognized tax benefits in other expense and general and administrative expense, respectively. Accrued interest and penalties related to unrecognized tax benefits were $0, $0 and $19 as of March 31, 2022, 2021 and 2020, respectively.

 

A reconciliation of the changes in the balance of unrecognized tax benefit amounts is as follows:

 

  

Year Ended March 31,

 
  

2022

  

2021

  

2020

 

Beginning balance

 $64  $653  $1,361 

Increase (decreases) related to prior period tax positions

  1,179   (629)  (1,027)

Increases related to current period tax positions

  86   40   319 

Ending balance

 $1,329  $64  $653 

 

During the year ended March 31, 2022, we recorded an income tax expense of approximately $1,179 related to our reserve associated with the acquired Agena Federal and California Research and Development credits, which increased the effective tax rate by 33.0%. The remaining amount of tax benefits that, if recognized, would affect the effective tax rate was $1,329 as of March 31, 2022, excluding interest and penalties. We expect that the remaining amount of unrecognized tax benefits will change in the next 12 months; however, we do not expect the change to have a significant impact on our consolidated statements of income or consolidated balance sheets. At this time, we expect resolution of the uncertain tax position within 12 months.

 

As of March 31, 2022, and March 31, 2021, undistributed earnings of our foreign subsidiaries amounted to $11,580 and $9,951, respectively. Those earnings are considered indefinitely reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability. Furthermore, as a result of the Tax Cuts and Jobs Act, a significant portion of the distribution may not be subject to current U.S. income taxes, resulting in no foreign tax credits. 

 

As of March 31, 2022, we had $26,137 of gross net operating losses for foreign tax purposes. The foreign net operating losses do not expire. Furthermore, Gyros U.S. had gross net operating losses of $7,870 and $3,941, for federal and state tax purposes, respectively, of which the federal net operating losses do not expire, while the state net operating losses began to expire in the 2022 tax year. Agena Bioscience had domestic gross net operating losses of $11,667 and $6,744, for federal and state tax purposes, respectively, of which the federal net operating losses do not expire, and the state net operating losses begin to expire in the 2034 tax year. In addition, we had $16 of foreign tax credit carryovers which will expire in the tax year 2029. Gyros U.S. also had $212 and $105, for federal and state purposes, respectively, of Research and Development credit carryforward which will begin to expire in the 2030 tax year for federal purposes and begin to expire in the 2037 tax year for state purposes. Agena Bioscience had $3,718 and $3,244, for federal and state tax purposes, respectively, of Research and Development credit carryforward, which will begin to expire in the 2034 tax year for federal purposes, and do not expire for state purposes.