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INCOME TAXES
 12 Months Ended
Mar. 31, 2024
INCOME TAXES  
INCOME TAXES

NOTE 5 – INCOME TAXES

We account for income taxes under ASC 740, Income Taxes. The following table reflects income and loss from continuing operations by location, and the provision for income taxes for the applicable fiscal years ended March 31:

​

​

​

​

​

​

​

​

​

    

2024

    

2023

Loss before income taxes

​

$

(5,109,945)

​

$

(783,422)

Income tax expense

​

 

1,932,227

​

 

195,584

Net loss

​

$

(7,042,172)

​

$

(979,006)

​

The components of the income tax provision consist of the following for the fiscal years ended March 31:

​

​

​

​

​

​

​

​

​

    

2024

    

2023

Current:

 

​

  

 

​

  

Federal

​

$

—

​

$

—

State

​

 

1,041

​

 

—

Total Current

​

$

1,041

​

$

—

Deferred:

​

 

​

​

 

​

Federal

​

$

2,087,627

​

$

(261,372)

State

​

 

(156,441)

​

 

456,956

Total Deferred

​

$

1,931,186

​

$

195,584

Income tax expense (benefit)

​

$

1,932,227

​

$

195,584

​

Our fiscal 2024 and 2023 taxes were measured at the U.S. statutory income tax rate of 21%. A reconciliation between income taxes computed at the U.S. federal statutory rate to the actual tax expense for income taxes reported in the Consolidated Statements of Operations follows for fiscal years ended March 31:

​

​

​

​

​

​

​

​

​

​

    

2024

    

2023

 

U.S. statutory income tax

​

$

(1,073,088)

​

$

(164,519)

​

State income tax, net of federal benefit

​

 

(164,433)

​

 

(151,878)

​

Nondeductible items related to business combination and dissolved foreign entity

​

​

—

​

​

65,482

​

Change in state NOLs

​

​

—

​

​

239,622

​

Change in valuation allowance

​

​

3,141,588

​

​

216,485

​

Stock-based compensation

​

 

—

​

 

(20,983)

​

Other

​

 

28,160

​

 

11,375

​

Income tax expense

​

$

1,932,227

​

$

195,584

​

Effective tax rate*

​

 

37.8

%  

 

25.0

%

Effective tax rate is calculated by dividing the income tax provision by loss before income taxes.

The following table summarizes the components of deferred income tax assets and liabilities at March 31:

​

​

​

​

​

​

​

​

​

    

2024

    

2023

Deferred tax assets:

 

​

  

 

​

  

Net operating loss carryforward

​

$

6,302,402

​

$

5,839,915

Compensation

​

 

142,232

​

 

213,308

Stock based compensation awards

​

​

7,525

​

​

242,579

Operating leases

​

​

1,195,891

​

​

—

Other items not currently deductible

​

 

536,664

​

 

126,792

Total deferred tax assets

​

 

8,184,714

​

 

6,422,594

Valuation allowance

​

​

(5,311,680)

​

​

(2,170,094)

Net deferred tax assets

​

 

2,873,034

​

 

4,252,500

Deferred tax liabilities:

​

​

​

​

​

​

Depreciation

​

​

(1,562,744)

​

​

(1,971,644)

Operating leases

​

​

(1,157,079)

​

​

—

Contract accounting methods

​

​

(153,211)

​

​

(349,670)

Total deferred tax liabilities

​

 

(2,873,034)

​

 

(2,321,314)

Deferred taxes, net

​

$

—

​

$

1,931,186

​

At December 31, 2023, the Company identified a need to increase the tax valuation allowance based on cumulative operating losses in recent years. Following an evaluation, we determined, however, that the required adjustments, recorded in the fourth quarter, were not material for the period ended December 31, 2023.

In assessing the recoverability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We have determined that it is more likely than not that certain future tax benefits may not be

realized. The assessment was based on the weight of negative evidence at the balance sheet date, our recent operating losses and unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels. Accordingly, a valuation allowance has been recorded against deferred tax assets that are unlikely to be realized. Realization of deferred tax assets will depend on the generation of sufficient taxable income in the appropriate jurisdictions, the reversal of deferred tax liabilities, tax planning strategies and other factors prior to the expiration date of the carryforwards. A change in the estimates used to make this determination could require an increase or a reduction the valuation allowance currently recorded against those deferred tax assets. The valuation allowance on deferred tax assets was approximately $5.3 million at March 31, 2024. We believe that it is more likely than not that the benefit from certain NOL carryforwards and other deferred tax assets will not be realized.

At March 31, 2024 we had federal net operating losses of $19.3 million which begin to expire in 2026. The Internal Revenue Code provides for a limitation on the annual use of net operating loss carryforwards following certain ownership changes that could limit our ability to utilize these carryforwards on a yearly basis. Also, U.S. tax laws may limit the time during which these loss carryforwards may be applied against future taxes. As such, certain pre-2021 Stadco net operating loss carryforwards available for TechPrecision’s consolidated tax group may be limited. Our remaining pre-2021 net operating losses total approximately $9.9 million.

We have not accrued any penalties with respect to uncertain tax positions. We file income tax returns in the U.S. federal jurisdiction and various U.S. state jurisdictions. Tax years 2021 and forward remain open for examination.