INCOME TAXES

The components of income tax expense (benefit) for the years ended March 31 are as follow:



$ in thousands	2014			2013		2012
Income tax expense (benefit):
Current - Federal	$	(35	)	$	149	$	(1,067	)
Current - State	137			179		106
Total income tax expense (benefit)	$	102		$	328	$	(961	)

There was no income tax expense attributable to equity for the three years ended March 31, 2014.

The following is a reconciliation of the expected Federal income tax rate to the consolidated effective tax rate for the years ended March 31:



	2014					2013					2012
$ in thousands	Amount			Percent		Amount			Percent		Amount			Percent
Statutory Federal income tax expense (benefit)	$	(250	)	34.0	%	$	337		34.0	%	$	(8,285	)	34.0	%
State and local income taxes, net of Federal tax benefit	(16		)	2.1		49			4.9		(1,541		)	6.3
General business credit	(32		)	4.4		(32		)	(3.3	)	(32		)	0.1
Difference in rates	(1,068		)	145.5		—			—		—			—
Valuation Allowance	(204		)	27.7		795			80.3		2,835			(11.6	)
Write off DTA due to Section 382 limitation	1,132			(154.1	)	(1,363		)	(137.7	)	6,089			(25.0	)
True-ups/Adjustments	255			(34.7	)	524			53.1		—			—
Other	285			(38.8	)	18			1.8		(27		)	0.1
Total income tax expense (benefit)	$	102		(13.9	)%	$	328		33.1	%	$	(961	)	3.9	%

Carver Federal's operating results includes a $102 thousand tax expense for the fiscal year ended March 31, 2014, which included a $204 thousand valuation allowance. For the fiscal year ended March 31, 2013, the total income tax expense of $328 thousand included a $795 thousand valuation allowance taken on the Bank's deferred tax assets. For the fiscal year ended March 31, 2012, the total income tax benefit of $1.0 million included an $2.8 million valuation allowance taken on the Bank's deferred tax assets.

Tax effects of existing temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are included in other assets at March 31 as follows:



$ in thousands	2014			2013
Deferred Tax Assets:
Allowance for loan losses	$	2,373		$	3,318
Deferred loan costs, net	193			366
Nonaccrual loan interest	64			2,265
Purchase accounting adjustment	44			144
Net operating loss carryforward	15,181			10,289
New markets tax credit	2,175			3,274
Depreciation	782			701
Minimum pension liability	—			110
Market value adjustment on HFS loans	752			1,608
Unrealized loss on available-for-sale securities	1,908			—
Other	577			601
Total Deferred Tax Assets	24,049			22,676
Deferred Tax Liabilities:
Income from affiliate	(46		)	176
Unrealized gain on available-for-sale securities	—			394
Total Deferred Tax Liabilities	(46		)	570
Deferred Tax Assets, net	24,095			22,106
Valuation Allowance	(24,095		)	(22,106		)
Deferred Tax Assets, net of valuation allowance	$	—		$	—

On June 29, 2011, the Company raised $55.0 million of equity. The capital raise triggered a change in control under Section 382 of the Internal Revenue Code. Generally, Section 382 limits the utilization of an entity's net operating loss carryforwards, general business credits, and recognized built-in losses upon a change in ownership. The Company expects to be subject to an annual limitation of approximately $0.9 million. The Company has a net deferred tax asset (“DTA”) of approximately $29.9 million. Based on management's calculations, the Section 382 limitation has resulted in previous reductions of the deferred tax asset of $5.8 million. A full valuation allowance for the remaining net deferred tax asset of $24.1 million has been recorded.

At March 31, 2014, the Company had net operating carryforwards for federal purposes of approximately $32.0 million, for state purposes of approximately $50.7 million and for city purposes of approximately $45.2 million which are available to offset future federal, state and city income and which expire over varying periods from March 2028 through March 2034.

The Company has no uncertain tax positions. The Company and its subsidiaries are subject to federal, New York State and New York City income taxation. The Company is no longer subject to examination by taxing authorities for years before March 31, 2008. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination; with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.