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Income Taxes
 6 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

Note 6. Income Taxes

The Company recorded an income tax benefit of approximately $0.1 million for the three months ended September 30, 2023 compared to an income tax benefit of approximately $1.0 million for the three months ended September 30, 2022. The Company’s effective tax rate decreased to 1.4% for the three months ended September 30, 2023 from 23.4% for the three months ended September 30, 2022. The Company recorded an income tax benefit of $0 for the six months ended September 30, 2023 compared to an income tax benefit of approximately $1.6 million for the six months ended September 30, 2022. The Company’s effective tax rate decreased to 0.0% for the six months ended September 30, 2023 from 24.4% for the six months ended September 30, 2022. The lower effective tax rate for the three and six months ended September 30, 2023 is primarily attributable to the establishment of a valuation allowance subsequent to September 30, 2022.

During the quarter ended December 31, 2022, the Company determined there was not sufficient positive evidence of future earnings to support a position that it will be able to realize its net deferred tax asset. The Company has significant negative evidence to overcome in the form of cumulative pre-tax losses from continuing operations. Therefore, it will continue to maintain a full valuation allowance on its U.S. federal and state net deferred tax asset. The Company does not have any material unrecognized tax benefits as of September 30, 2023.

The net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes are reflected in deferred income taxes. Significant components of the Company’s deferred income tax assets consist of the following:

 

 

 

(In thousands)

 

 

 

September 30, 2023

 

 

March 31, 2023

 

 

 

 

 

 

 

 

Allowance for credit losses not currently deductible
   for tax purposes

 

$

3,241

 

 

$

4,538

 

Share-based compensation

 

 

30

 

 

 

20

 

Federal and state net operating loss carryforwards

 

 

8,022

 

 

 

4,812

 

Right of use liability

 

 

37

 

 

 

43

 

Other items

 

 

26

 

 

 

87

 

Valuation allowance

 

 

(11,265

)

 

 

(9,457

)

Total deferred tax assets

 

 

91

 

 

 

43

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

Right of use asset

 

 

37

 

 

 

43

 

Other items

 

 

54

 

 

 

-

 

Total deferred tax liabilities

 

 

91

 

 

 

43

 

Deferred income taxes

 

$

-

 

 

$

-

 

 

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 negative evidence evaluated was the cumulative pre-tax loss over the three-year period ended September 30, 2023, as a result, a full valuation allowance remained recorded against the Company’s net deferred tax asset.

The federal net operating loss ("NOL") generated beginning in 2021 and later will carry forward indefinitely, while some state NOLs begin to expire March 31, 2039. As of September 30, 2023, the Company maintained a deferred income tax valuation allowance of $11.3 million, the remaining state Gross NOL was $53.5 million, and the remaining federal Gross NOL amounted to $31.3 million.