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Income Taxes | 12 Months Ended
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Mar. 31, 2018
Income Taxes [Abstract] |
Income Taxes | 17. Income Taxes On December 22, 2017, comprehensive tax reform legislation known as the Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act amends the Internal Revenue Code to reduce U.S. tax rates and modify policies, credits and deductions for individuals and businesses. The effects of the Tax Reform Act on the Company are as follows: Remeasurement of Deferred Taxes The Tax Reform Act permanently reduces the U.S. federal corporate income tax rate from 35% to 21%, effective for tax years beginning after 2017. GAAP requires an adjustment to deferred taxes as a result of a change in the corporate tax rate in the period that the change is enacted, with the change recorded to the current year tax provision. Accordingly, the Company has remeasured its deferred tax assets and liabilities at the new tax rate and recorded a one-time noncash tax charge of $4,863,000 to deferred income taxes for the year ended March 31, 2018. This charge is reflected in the Company’s increased effective tax rate for the year. Mandatory Transition Tax In connection with the move by the U.S. to a partial territorial tax system, the Tax Reform Act provides for the exclusion of foreign-sourced dividends received by a U.S. corporation from its foreign-owned corporations beginning in 2018. In addition, the Tax Reform Act imposes a toll charge in 2017 on the deemed repatriation of a U.S. shareholder’s pro-rata share of certain foreign subsidiaries’ post-1986 accumulated earnings. The toll charge assesses an effective tax rate of 15.5% on cash and other liquid assets of U.S.-owned foreign corporations, while subjecting all other property of such corporations to an effective tax rate of 8.0%, and allows for available foreign tax credits to reduce the resulting toll charge. Taxpayers may elect to pay this tax liability over eight years on an interest-free basis. The Company has accrued an estimated toll charge liability of $530,000, reflected in current taxes payable as of March 31, 2018. Executive Compensation The Tax Reform Act maintains the $1,000,000 limitation on deductible compensation to cover employees. However, it eliminates the current exception for performance-based compensation and expands the definition of covered employees to include the chief financial officer. The expansion of executive compensation limitations are effective in 2018. The modifications do not apply to remuneration paid pursuant to a written binding contract in effect on November 2, 2017 if it was not materially modified on or after that date. As a result of the Tax Reform Act, the SEC provided guidance (Staff Accounting Bulletin 118 (“SAB 118”)) that allows public companies to record provisional amounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment. As of March 31, 2018, the Company has not completed the accounting for the tax effects of the Tax Reform Act. Therefore, the Company has recorded provisional amounts for the effects of the Tax Reform Act, including but not limited to, the following primary impacts of the Tax Reform Act: remeasurement of deferred tax assets and liabilities and the estimated calculation of the one-time mandatory transition tax on undistributed earnings of foreign affiliates. The income tax expense is as follows:
|  | Years Ended March 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current tax expense |  |  |  |  |  |  |  |  |
Federal |  | $ | 12,153,000 |  |  | $ | 9,451,000 |  |  | $ | 12,400,000 |
State |  |  | 1,406,000 |  |  |  | 318,000 |  |  |  | 1,995,000 |
Foreign |  |  | 1,215,000 |  |  |  | 1,455,000 |  |  |  | 803,000 |
Total current tax expense |  |  | 14,774,000 |  |  |  | 11,224,000 |  |  |  | 15,198,000 |
Deferred tax expense (benefit) |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 2,779,000 |  |  |  | 4,291,000 |  |  |  | (2,929,000 | )
State |  |  | 333,000 |  |  |  | 2,174,000 |  |  |  | (757,000 | )
Foreign |  |  | (23,000 | ) |  |  | (384,000 | ) |  |  | (33,000 | )
Total deferred tax expense (benefit) |  |  | 3,089,000 |  |  |  | 6,081,000 |  |  |  | (3,719,000 | )
Total income tax expense |  | $ | 17,863,000 |  |  | $ | 17,305,000 |  |  | $ | 11,479,000 |
Deferred income taxes consist of the following at March 31:
|  | 2018 |  |  | 2017 |
Assets |  |  |  |  |  |
Accounts receivable valuation |  | $ | 3,915,000 |  |  | $ | 4,697,000 |
Allowance for customer incentives |  |  | 2,038,000 |  |  |  | 2,894,000 |
Inventory obsolescence reserve |  |  | 1,666,000 |  |  |  | 1,608,000 |
Stock options |  |  | 1,728,000 |  |  |  | 1,971,000 |
Intangibles, net |  |  | 59,000 |  |  |  | 339,000 |
Estimate for returns |  |  | 1,115,000 |  |  |  | 3,191,000 |
Accrued compensation |  |  | 1,152,000 |  |  |  | 1,785,000 |
Net operating losses |  |  | 1,079,000 |  |  |  | 834,000 |
Tax credits |  |  | 1,363,000 |  |  |  | - |
Other |  |  | 2,091,000 |  |  |  | 2,065,000 |
Total deferred tax assets |  | $ | 16,206,000 |  |  | $ | 19,384,000 |
Liabilities |  |  |  |  |  |  |  |
Property and equipment, net |  |  | (1,025,000 | ) |  |  | (1,605,000 | )
Other |  |  | (3,072,000 | ) |  |  | (4,413,000 | )
Total deferred tax liabilities |  | $ | (4,097,000 | ) |  | $ | (6,018,000 | )
Less valuation allowance |  | $ | (1,779,000 | ) |  | $ | - |
Net deferred tax assets |  | $ | 10,330,000 |  |  | $ | 13,366,000 |
Net long-term deferred income tax liability |  |  | (226,000 | ) |  |  | (180,000 | )
Net long-term deferred income tax asset |  |  | 10,556,000 |  |  |  | 13,546,000 |
Total |  | $ | 10,330,000 |  |  | $ | 13,366,000 |
At March 31, 2018, the Company had state net operating loss carryforwards of $932,000. The net operating loss carryforwards expire between fiscal years 2022 and 2036. Realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income. Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets. The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans. A valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized. In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence. Deferred tax assets arising primarily as a result of net operating loss carry-forwards and research and development credits in connection with the Company’s July 2017 acquisition have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Should the actual amount differ from the Company’s estimates, the amount of the valuation allowance could be impacted. For the years ended March 31, 2018, 2017, and 2016, the primary components of the Company’s income tax expense were (i) the impact of the changes as a result of the Tax Reform Act, (ii) foreign income taxed at rates that are different from the federal statutory rate, (iii) non-deductible expenses in connection with the fair value adjustments on the warrants, (iv) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (v) the impact of uncertain tax positions, (vi) the change in the blended state rate, and (vii) the excess tax benefit relating to share-based compensation. The difference between the income tax expense at the federal statutory rate and the Company’s effective tax rate is as follows:
|  | Years Ended March 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Statutory federal income tax rate |  |  | 31.5 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income tax rate, net of federal benefit |  |  | 3.3 | % |  |  | 2.2 | % |  |  | 4.0 | %
Excess tax benefit from stock compensation |  |  | (0.7 | )% |  |  | (1.4 | )% |  |  | - | %
Foreign income taxed at different rates |  |  | (2.6 | )% |  |  | (0.7 | )% |  |  | (0.8 | )%
Warrants |  |  | (2.1 | )% |  |  | (2.4 | )% |  |  | 8.2 | %
Non-deductible executive compensation |  |  | 1.0 | % |  |  | 0.8 | % |  |  | 2.2 | %
Change in valuation allowance |  |  | 4.9 | % |  |  | - | % |  |  | - | %
Effects of mandatory redeemed repatriation |  |  | 1.6 | % |  |  | - | % |  |  | - | %
Effects of U.S. tax rate changes |  |  | 14.2 | % |  |  | - | % |  |  | - | %
Uncertain Tax Positions |  |  | 0.6 | % |  |  | (0.2 | )% |  |  | 0.4 | %
Other income tax |  |  | 0.6 | % |  |  | (1.8 | )% |  |  | 3.1 | %
|  |  | 52.3 | % |  |  | 31.5 | % |  |  | 52.1 | %
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions with varying statutes of limitations. At March 31, 2018, the Company is not under examination in any jurisdiction and the years ended March 31, 2017, 2016, and 2015 remain subject to examination. The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | Years Ended March 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Balance at beginning of period |  | $ | 1,092,000 |  |  | $ | 1,181,000 |  |  | $ | 1,117,000 |
Additions based on tax positions related to the current year |  |  | 234,000 |  |  |  | 141,000 |  |  |  | 57,000 |
Additions for tax positions of prior year |  |  | - |  |  |  | 106,000 |  |  |  | 217,000 |
Reductions for tax positions of prior year |  |  | (107,000 | ) |  |  | - |  |  |  | (210,000 | )
Settlements |  |  | - |  |  |  | (336,000 | ) |  |  | - |
Balance at end of period |  | $ | 1,219,000 |  |  | $ | 1,092,000 |  |  | $ | 1,181,000 |
At March 31, 2018, 2017 and 2016, there are $1,054,000, $840,000 and $678,000 of unrecognized tax benefits that if recognized would affect the annual effective tax rate. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as part of income tax expense. During the years ended March 31, 2018, 2017, and 2016, the Company recognized approximately $5,000, $51,000, and $34,000 in interest and penalties. The Company had approximately $146,000 and $141,000 for the payment of interest and penalties accrued at March 31, 2018 and 2017, respectively.

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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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