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INCOME TAXES | 12 Months Ended
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Mar. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | NCOME TAXES Income tax expense (benefit) attributable to (loss) income from continuing operations consists of (in thousands):
| Year Ended March 31,
| 2023 |  | 2022
Current: |  |  |
Federal | $ | 46 |  |  | $ | 1,358 |
State | 150 |  |  | 44 |
Foreign | 845 |  |  | 134 |
Total current | 1,041 |  |  | 1,536 |
Deferred: |  |  |
Federal | 29 |  |  | (507) |
State | (442) |  |  | 140 |
Foreign | (196) |  |  | — |
Total deferred | (609) |  |  | (367) |
Total | $ | 432 |  |  | $ | 1,169 |
Income tax expense attributable to income (loss) from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate of 21.0% to pretax income (loss) from continuing operations as follows (in thousands):
| Year Ended March 31,
| 2023 |  | 2022
Expected Federal income tax expense (benefit) U.S. statutory rate | $ | (2,384) |  |  | 21.0 | % |  | $ | 2,813 |  |  | 21.0 | %
State income taxes, net of federal benefit | (558) |  |  | 4.9 | % |  | 177 |  |  | 1.3 | %
Permanent Items | 28 |  |  | -0.2 | % |  | (165) |  |  | -1.2 | %
Micro-captive insurance benefit | (274) |  |  | 2.4 | % |  | (233) |  |  | -1.8 | %
Change in valuation allowance | 3,149 |  |  | -27.7 | % |  | (2,251) |  |  | -16.8 | %
Income attributable to minority interest - Contrail | 190 |  |  | -1.7 | % |  | (174) |  |  | -1.3 | %
Write-off Delphax Tech SAS | — |  |  | 0.0 | % |  | 2,225 |  |  | 16.6 | %
PPP Loan Forgiveness | — |  |  | 0.0 | % |  | (1,650) |  |  | -12.3 | %
Other differences, net | 281 |  |  | -2.5 | % |  | 427 |  |  | 3.2 | %
Income tax expense (benefit) | $ | 432 |  |  | -3.8 | % |  | $ | 1,169 |  |  | 8.7 | %
The Company did not record any liabilities for uncertain tax positions for the fiscal years ended March 31, 2023 and March 31, 2022. The Company (exclusive of Delphax which has a full valuation allowance) has federal gross operating losses of $1.7 million and state gross operating losses of $9.4 million at March 31, 2023. These net operating losses will begin to expire in tax year 2031. The Company has foreign tax credits of $0.4 million that will begin to expire in tax year 2029. DSI and Delphax (collectively known as the “Delphax entities”) are not included in Air T’s consolidated tax return. During the year ended March 31, 2023, DSI and Delphax accounted for $0.3 million and $0.0 million, respectively, of fiscal year 2023's valuation allowance effect. During the year ended March 31, 2022, each entity, respectively, accounted for $0.2 million and $(2.2) million of the fiscal year 2022's valuation allowance effect. Deferred tax assets and liabilities were comprised of the following (in thousands):
| 2023 |  | 2022
Net operating loss & attribute carryforwards | $ | 5,968 |  |  | $ | 3,794 |
Unrealized losses on investments | 1,740 |  |  | 1,669 |
Inventory reserve | 851 |  |  | 682 |
Accrued vacation | 421 |  |  | 327 |
Foreign tax credit | 391 |  |  | 263 |
Accounts and notes receivable | 182 |  |  | 235 |
Interest rate swaps | 77 |  |  | 138 |
Investment in partnerships | 1,723 |  |  | 671 |
Lease liabilities | 3,000 |  |  | 1,691 |
Other deferred tax assets | 115 |  |  | 286 |
Total deferred tax assets | 14,468 |  |  | 9,756 |
Bargain purchase gain | (191) |  |  | (447) |
Property and equipment | (1,804) |  |  | (1,532) |
Right-of-use assets | (2,815) |  |  | (1,511) |
Capital gain deferment | (1,799) |  |  | (1,696) |
Foreign intangible assets | (2,159) |  |  | (2,572) |
Other deferred tax liabilities | (110) |  |  | (36) |
Total deferred tax liabilities | (8,878) |  |  | (7,794) |
Net deferred tax assets | $ | 5,590 |  |  | $ | 1,962 |
Less valuation allowance | (8,007) |  |  | (4,774) |
Net deferred tax liabilities | $ | (2,417) |  |  | $ | (2,812) |
Delphax entities Effective on November 24, 2015, Air T, Inc. purchased interests in Delphax. With an equity investment level by the Company of approximately 67%, Delphax is required to continue filing a separate United States corporate tax return. Furthermore, Delphax historically had foreign subsidiaries located in France, Canada and the United Kingdom; all of which file(d) tax returns in those jurisdictions. With few exceptions, Delphax, is no longer subject to examinations by income tax authorities for tax years before 2016. Delphax maintains a September 30 fiscal year end and DSI maintains a March 31 fiscal year end. The returns for the fiscal years ended September 30, 2022 and March 31, 2023 have not yet been filed. The gross deferred tax balances related to the Delphax entities includes estimated foreign, U.S. federal and U.S. state loss carryforwards of $5.4 million, $8.4 million and $2.2 million, respectively. The net operating losses expire in varying amounts beginning in the tax year 2027. The provisions of ASC 740 require an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets will be recovered. In accounting for the Delphax entities' tax attributes, the Company has established a full valuation allowance of $3.4 million at March 31, 2023, and $3.1 million at March 31, 2022. The cumulative tax losses incurred by the Delphax entities in recent years was the primary basis for the Company’s determination that a full valuation allowance should be established against the Delphax entities’ net deferred tax assets. The Company continues to assert that it will permanently reinvest any foreign earnings of DSI in a foreign country and will not repatriate those earnings back to the U.S. As a result of its permanent reinvestment assertion, the Company has not recorded deferred taxes related to DSI under the indefinite exception. Valuation Allowance Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of March 31, 2023, a valuation allowance of $8.0 million (inclusive of the Delphax entities’ valuation allowances that were discussed above) has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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