INCOME TAXES

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



$ in thousands	2016		2015
Income tax expense (benefit):
Current - Federal	$	4	$	—
Current - State	124		166
Total income tax expense (benefit)	$	128	$	166

There was no income tax expense attributable to equity for the two years ended March 31, 2016.

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



	2016					2015 Restated ⁽¹⁾
$ in thousands	Amount			Percent		Amount			Percent
Statutory Federal income tax expense (benefit)	$	(14	)	34.0	%	$	(36	)	34.0	%
State and local income tax, net of Federal tax benefit	19			(44.6	)	(49		)	46.2
General business credit	(32		)	76.7		(32		)	30.2
Difference in rates	(23		)	54.2		(1,568		)	1,479.2
Valuation Allowance	330			(782.9	)	1,832			(1,728.3	)
Other	(152		)	360.1		19			(17.9	)
Total income tax expense	$	128		(302.5	)%	$	166		(156.6	)%

⁽¹⁾March 31, 2015 balances have been restated from previously reported results to correct for certain other errors from prior periods.

Carver Federal's operating results includes a $128 thousand tax expense for the fiscal year ended March 31, 2016, which included a $330 thousand change in the valuation allowance taken on the Bank's deferred tax assets. For the fiscal year ended March 31, 2015, the total income tax expense of $166 thousand included a $1.8 million change in the valuation allowance.

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	2016			2015 Restated ⁽¹⁾
Deferred Tax Assets:
Allowance for loan losses	$	2,230		$	1,682
Nonaccrual loan interest	67			68
Purchase accounting adjustment	3			23
Net operating loss carryforward	17,400			17,742
New markets tax credit	2,207			2,207
Depreciation	1,863			977
Market value adjustment on HFS loans	13			464
Unrealized loss on available-for-sale securities	139			448
Other	415			946
Total Deferred Tax Assets	24,337			24,557
Deferred Tax Liabilities:
Income from affiliate	—			671
Other	593			162
Total Deferred Tax Liabilities	593			833
Deferred Tax Assets, net	23,744			23,724
Valuation Allowance	(23,744		)	(23,724		)
Deferred Tax Assets, net of valuation allowance	$	—		$	—

⁽¹⁾March 31, 2015 balances have been restated from previously reported results to correct for certain other errors from prior periods.

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 $23.7 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 $23.7 million has been recorded.

At March 31, 2016, the Company had net operating carryforwards for federal purposes of approximately $31.0 million, for state purposes of approximately $49.3 million and for city purposes of approximately $43.0 million which are available to offset future federal, state and city income and which expire over varying periods from March 2028 through March 2035.

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.