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7. Income Taxes
 12 Months Ended
Mar. 31, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

 

The Company files a consolidated federal income tax return and various state income tax returns. The amount of income taxes we record requires the interpretation of complex rules and regulations of federal and state taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2012. In January 2014, the Company was notified by the Internal Revenue Service that it had been selected at random for a compliance research examination of fiscal year ending March 31, 2012. The Company has been informally advised by an employee of the Internal Revenue Service that the audit resulted in no change to the Company’s federal income tax return.

  

Significant components of net deferred tax assets (liabilities) at March 31 are as follows:

 

   2015  2014
Deferred tax assets:          
Percentage depletion carryforwards  $1,535,126   $1,463,834 
Deferred stock-based compensation   36,958    29,475 
Asset retirement obligation   384,467    298,089 
Net operating loss   720,308    298,736 
Derivative instruments   —      13,944 
Other   11,111    9,673 
    2,687,970    2,113,751 
Deferred tax liabilities:          
Excess financial accounting bases over tax bases of    property and equipment   (3,348,840)   (2,972,200)
Net deferred tax liabilities  $(660,870)  $(858,449)

 

As of March 31, 2015, the Company has a statutory depletion carryforward of approximately $4,950,000, which does not expire. At March 31, 2015, the Company had a net operating loss carryforward for regular income tax reporting purposes of approximately $4,500,000, which will begin expiring in 2029. The Company’s ability to use some of its net operating loss carryforwards and certain other tax attributes to reduce current and future U.S. federal taxable income is subject to limitations under the Internal Revenue Code.

  

The income tax provision consists of the following for years ended March 31, 2015, 2014 and 2013:

  

   2015  2014  2013
Current income tax expense  $—     $6,500   $—   
Deferred income tax (benefit) expense   (197,499 )   5,250    (31,504)
Total income tax provision:  $(197,499 )  $11,750   $(31,504)
Effective tax rate   (37%)   4%   (15%)

 

The current income tax expense for fiscal year 2014 is the Company’s anticipated alternative minimum tax that cannot offset with its alternative minimum tax net operating loss.

  

A reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for years ended March 31 follows:

  

   2015  2014  2013
Tax expense at federal statutory rate (1)  $(183,085)  $106,374   $(70,678)
Statutory depletion carryforward   (71,292)   (127,204)   —   
Effect of graduated rates   12,221    (13,841)   3,391 
Permanent differences   44,576    46,421    35,783 
Total income tax (benefit) expense  $(197,499)  $11,750   $(31,504)
Effective income tax rate   (37%)   4%   (15%)

(1) The federal statutory rate was 34% for fiscal years ending March 31, 2015, 2014 and 2013.

For the years ended March 31, 2015, 2014 and 2013, the Company did not have any uncertain tax positions.

  

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

  

   2015  2014  2013
Unrecognized tax benefits at beginning of period  $679,000   $677,000   $677,000 
Additions based on tax positions related to the current year   —      2,000    —   
Changes to tax positions of prior years   —      —      —   
Settlements   —      —      —   
Expirations   —      —      —   
Unrecognized tax benefits at end of period  $679,000   $679,000   $677,000 

 

While the amount of unrecognized tax benefits may change in the next 12 months, the Company does not expect any change to have a significant impact on its results of operations. The recognition of the total amount of the unrecognized tax benefits would have an impact on the effective tax rate. If these unrecognized tax benefits are disallowed, the Company will be required to pay additional taxes.