Entity information:
16. Income Taxes

The income tax expense is as follows:

  
Years Ended March 31,
 
  
2017
  
2016
  
2015
 
Current tax expense
         
Federal
 
$
9,451,000
  
$
12,400,000
  
$
1,523,000
 
State
  
318,000
   
1,995,000
   
1,100,000
 
Foreign
  
1,455,000
   
803,000
   
527,000
 
Total current tax expense
  
11,224,000
   
15,198,000
   
3,150,000
 
Deferred tax expense (benefit)
            
Federal
  
4,291,000
   
(2,929,000
)
  
5,553,000
 
State
  
2,174,000
   
(757,000
)
  
93,000
 
Foreign
  
(384,000
)
  
(33,000
)
  
272,000
 
Total deferred tax expense (benefit)
  
6,081,000
   
(3,719,000
)
  
5,918,000
 
Total income tax expense
 
$
17,305,000
  
$
11,479,000
  
$
9,068,000
 
 
Deferred income taxes consist of the following at March 31:

  
2017
  
2016
 
Assets
      
Accounts receivable valuation
 
$
4,697,000
  
$
6,438,000
 
Allowance for customer incentives
  
2,894,000
   
769,000
 
Inventory obsolescence reserve
  
1,608,000
   
1,431,000
 
Stock options
  
1,971,000
   
1,714,000
 
Intangibles, net
  
339,000
   
380,000
 
Estimate for returns
  
3,191,000
   
7,938,000
 
Accrued compensation
  
1,785,000
   
1,485,000
 
Net operating losses
  
834,000
   
2,070,000
 
Tax credits
  
-
   
1,660,000
 
Other
  
2,065,000
   
2,583,000
 
Total deferred tax assets
 
$
19,384,000
  
$
26,468,000
 
Liabilities
        
Property and equipment, net
  
(1,605,000
)
  
(1,119,000
)
Other
  
(4,413,000
)
  
(6,277,000
)
Total deferred tax liabilities
 
$
(6,018,000
)
 
$
(7,396,000
)
Less valuation allowance
 
$
-
  
$
-
 
Net deferred tax assets
 
$
13,366,000
  
$
19,072,000
 
Net long-term deferred income tax liability
  
(180,000
)
  
(196,000
)
Net long-term deferred income tax asset
  
13,546,000
   
19,268,000
 
Total
 
$
13,366,000
  
$
19,072,000
 

At March 31, 2017, the Company had state net operating loss carryforwards of $6,334,000. The net operating loss carryforwards expire between fiscal years 2021 and 2033.

Realization of the Company's deferred tax assets is dependent upon the Company’s ability to generate sufficient taxable income. Management reviews the Company's deferred tax assets on a jurisdiction by jurisdiction basis to determine whether it is more likely than not that the deferred tax assets will be realized. Management believes that it is more likely than not that future taxable income will be sufficient to realize the recorded deferred tax assets. In evaluating this ability, management considers long-term agreements with the Company’s major customers and the Company also periodically compares its forecasts to actual results. Even though there can be no assurance that the forecasted results will be achieved, the history of income in all other jurisdictions provides sufficient positive evidence that no valuation allowance is needed.

For the years ended March 31, 2017, 2016, and 2015, the primary components of the Company’s income tax expense were (i) the current liability due to federal, state and foreign income taxes, (ii) foreign income taxed at rates that are different from the federal statutory rate, (iii) non-deductible expenses in connection with the fair value adjustments on the warrants, (iv) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (v) the impact of uncertain tax positions, and (vi) the change in the blended state rate. In addition, the Company’s income tax expense for the year ended March 31, 2017 was positively impacted by $748,000 of excess tax benefits as a result of the early adoption of the FASB’s new guidance on share-based compensation (see Note 2).
 
The difference between the income tax expense at the federal statutory rate and the Company’s effective tax rate is as follows:

  
Years Ended March 31,
 
  
2017
  
2016
  
2015
 
          
Statutory federal income tax rate
  
35.0
%
  
35.0
%
  
35.0
%
State income tax rate, net of federal benefit
  
2.2
%
  
4.0
%
  
2.2
%
Change in deferred tax rate
  
-
%
  
-
%
  
(0.2
)%
Excess tax benefit from stock compensation
  
(1.4
)%
  
-
%
  
-
%
Foreign income taxed at different rates
  
(0.7
)%
  
(0.8
)%
  
(0.9
)%
Warrants
  
(2.4
)%
  
8.2
%
  
0.8
%
Non-deductible executive compensation
  
0.8
%
  
2.2
%
  
3.4
%
Uncertain Tax Positions
  
(0.2
)%
  
0.4
%
  
2.5
%
Other income tax
  
(1.8
)%
  
3.1
%
  
1.4
%
   
31.5
%
  
52.1
%
  
44.2
%

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions with varying statutes of limitations. At March 31, 2017, the Company is not under examination in any jurisdiction and the years ended March 31, 2017, 2016, and 2015 remain subject to examination. The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.

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

  
Years Ended March 31,
 
  
2017
  
2016
  
2015
 
Balance at beginning of period
 
$
1,181,000
  
$
1,117,000
  
$
540,000
 
Additions based on tax positions related to the current year
  
141,000
   
57,000
   
359,000
 
Additions for tax positions of prior year
  
106,000
   
217,000
   
336,000
 
Reductions for tax positions of prior year
  
-
   
(210,000
)
  
(118,000
)
Settlements
  
(336,000
)
  
-
   
-
 
Balance at end of period
 
$
1,092,000
  
$
1,181,000
  
$
1,117,000
 

At March 31, 2017, 2016 and 2015, there are $840,000, $678,000 and $958,000 of unrecognized tax benefits that if recognized would affect the annual effective tax rate.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as part of income tax expense. During the years ended March 31, 2017, 2016, and 2015, the Company recognized approximately $51,000, $34,000, and $(56,000) in interest and penalties. The Company had approximately $141,000 and $90,000 for the payment of interest and penalties accrued at March 31, 2017 and 2016, respectively.