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INCOME TAXES | 12 Months Ended
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Apr. 30, 2023
INCOME TAXES |
INCOME TAXES | (13) INCOME TAXES Worthless Stock Deduction Palm Coast Data Holdco, Inc., a subsidiary of the Company, had previously been the owner of the Company’s fulfillment services business. During 2023, the Company converted Palm Coast Data Holdco, Inc. to a limited liability company and made an election to treat the limited liability company as a disregarded entity for U.S. federal income tax purposes. This resulted in a worthless stock deduction for tax purposes. As a result of the worthless stock deduction, the Company incurred an operating tax loss of $62,180,000, yielding an income tax benefit of $13,058,000 for U.S. federal corporate income taxes and an income tax benefit of $3,013,000 for New Mexico state corporate income taxes. The Company expects its operations to generate sufficient taxable income to fully utilize the tax benefit of this tax loss. The full tax benefit expected from the Company’s worthless stock deduction was accrued during 2023 and reflected as a reduction to the Company’s (benefit) provision for income taxes and an increase in deferred income taxes, net without any valuation allowance. The Company did not provide a valuation allowance against deferred tax assets, net with respect to the worthless stock deduction due to the Company’s belief that it is more likely than not based upon the available evidence that such deferred tax assets will be realized. In making this determination, the Company projected its future earnings (including currently unrealized gains on real estate inventory) for the future recoverability of such deferred tax assets. While the Company believes that it has utilized a reasonable method to make this valuation allowance determination, should factors and conditions differ materially from those used by the Company in making such determination (including if the Company does not generate sufficient future taxable income to fully utilize the tax benefit of the tax loss included in deferred income taxes, net), the actual realization of deferred tax assets could differ materially from the reported amounts. This tax loss may be subject to audit and possible adjustment by the U.S. Internal Revenue Service (“IRS”), which could result in a reversal of none, part or all of the income tax benefit or could result in a benefit higher than the amount recorded. If the IRS rejects or reduces the amount of the income tax benefit related to the worthless stock deduction, the Company may have to pay additional cash income taxes, which would adversely affect the Company’s results of operations, financial condition and cash flows. The Company cannot guarantee what the ultimate outcome or amount of the tax benefit the Company will receive, if any. Under federal income tax law, net operating losses have an unlimited carryforward period and the deductibility of such federal net operating losses is limited to 80% of taxable income in any year during the carryforward period. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, the Company’s ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if the Company experiences an “ownership change.” A Section 382 “ownership change” generally occurs if one or more shareholders or groups of shareholders who own at least 5% of the Company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws in the United States. It is possible that any future ownership changes could have a material effect on the use of the Company’s net operating loss carryforwards or other tax attributes. Provision for Income Taxes and Deferred Income Tax Asset ​ The provision (benefit) for income taxes consists of the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended April 30,
​ |  | 2023 |  | 2022
Current: |  | ​ |  |  | ​ |
Federal | ​ | $ | — | ​ | $ | 2,876
State and local | ​ |  | 35 | ​ |  | 1,062
​ | ​ |  | 35 | ​ |  | 3,938
Deferred: | ​ |  | ​ | ​ |  |
Federal | ​ |  | (10,555) | ​ |  | 1,333
State and local | ​ |  | (3,629) | ​ |  | 433
​ | ​ |  | (14,184) | ​ |  | 1,766
Total (benefit) provision for income taxes | ​ | $ | (14,149) | ​ | $ | 5,704
​ The components of the net deferred income taxes are as follows (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | April 30,
​ |  | 2023 |  | 2022
Deferred income tax assets: |  | ​ |  |  | ​ |
State tax loss carryforwards | ​ | $ | 2,921 | ​ | $ | 4,199
U.S. federal NOL carryforward | ​ |  | 10,010 | ​ |  | —
Accrued pension costs | ​ |  | — | ​ |  | 9
Vacation accrual | ​ |  | 9 | ​ |  | 14
Real estate basis differences | ​ |  | 3,233 | ​ |  | 3,441
Other | ​ |  | 284 | ​ |  | 230
Total deferred income tax assets | ​ | ​ | 16,457 | ​ | ​ | 7,893
​
​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred income tax liabilities: |  | ​ |  |  | ​ |
Depreciable assets |  | ​ | (19) |  | ​ | —
Deferred gains on investment assets |  | ​ | (2,474) |  | ​ | (2,387)
Prepaid pension costs | ​ | ​ | (576) | ​ | ​ | (363)
Other |  | ​ | (43) |  | ​ | (36)
Total deferred income tax liabilities |  | ​ | (3,112) |  | ​ | (2,786)
Valuation allowance for realization of certain deferred income tax assets |  | ​ | (852) |  | ​ | (4,149)
Net deferred income tax asset | ​ | $ | 12,493 | ​ | $ | 958
​ A valuation allowance is provided when it is considered more likely than not that certain deferred tax assets will not be realized. The valuation allowance relates primarily to deferred tax assets, including net operating loss carryforwards, in states where the Company either has no current operations or its operations are not considered likely to realize the deferred tax assets due to the amount of the applicable state net operating loss or its expected expiration date. The $3,297,000 decrease in the valuation allowance in 2023 is due to a reevaluation of state net operating losses expected to be realizable. The Company has federal net operating loss carryforwards of $47,670,000, which do not have an expiration. The Company has state net operating loss carryforwards of $55,930,000 that expire beginning in the fiscal year ending April 30, 2038. The following table reconciles taxes computed at the U.S. federal statutory income tax rate from continuing operations to the Company’s actual tax provision (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended April 30,
​ |  | 2023 |  | 2022
Computed tax provision at statutory rate | ​ | $ | 1,614 | ​ | $ | 4,526
Increase (reduction) in tax resulting from: | ​ |  | ​ | ​ |  | ​
Deferred tax rate changes | ​ |  | 105 | ​ |  | (453)
Change in valuation allowances | ​ |  | (3,297) | ​ |  | 183
State income taxes, net of federal income tax effect | ​ |  | (2,222) | ​ |  | 1,095
Permanent items | ​ | ​ | (13,057) | ​ | ​ | —
Other | ​ |  | 2,708 | ​ |  | 353
Actual tax (benefit) provision | ​ | $ | (14,149) | ​ | $ | 5,704
​ The Company is subject to U.S. federal income taxes and various state and local income taxes. Tax regulations within each jurisdiction are subject to interpretation and require significant judgment to apply. Federal tax returns prior to the fiscal year ended April 30, 2018 are no longer subject to examination due to the expiration of the statute of limitations. State tax returns prior to the fiscal year ended April 30, 2020 are no longer subject to examination due to the expiration of the applicable statutes of limitations. ASC 740 clarifies the accounting for uncertain tax positions, prescribing a minimum recognition threshold a tax position is required to meet before being recognized, and providing guidance on the derecognition, measurement, classification and disclosure relating to income taxes. The Company has no unrecognized tax benefits for 2023 and 2022. The Company has elected to include interest and penalties in its income tax expense. The Company had no accrued interest or penalties as of April 30, 2023 and 2022.

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