INCOME TAXES
The following table presents the components of income tax expense:
|
| | | | | | | | |
| | For the Fiscal Year Ended March 31, |
(In thousands) | | 2017 | | 2016 |
Federal: | | | | |
Current | | $ | (140 | ) | | $ | 140 |
|
Deferred | | — |
| | — |
|
Total federal | | (140 | ) | | 140 |
|
State: | | | | |
Current | | 392 |
| | 205 |
|
Deferred | | — |
| | — |
|
Total state | | 392 |
| | 205 |
|
Income tax expense | | $ | 252 |
| | $ | 345 |
|
Net deferred taxes consisted of the following: |
| | | | | | | | |
| | As of March 31, |
(In thousands) | | 2017 | | 2016 |
Deferred tax assets: | | | | |
Net operating loss carryforwards | | $ | 98,232 |
| | $ | 99,524 |
|
Stock based compensation | | 2,742 |
| | 4,432 |
|
Intangibles | | 8,100 |
| | 8,005 |
|
Revenue deferral | | 47 |
| | 46 |
|
Interest rate derivatives | | 253 |
| | 199 |
|
Capital loss carryforwards | | 4,454 |
| | 7,951 |
|
Other | | 2,997 |
| | 2,224 |
|
Total deferred tax assets before valuation allowance | | 116,825 |
| | 122,381 |
|
Less: Valuation allowance | | (106,718 | ) | | (104,285 | ) |
Total deferred tax assets after valuation allowance | | $ | 10,107 |
| | $ | 18,096 |
|
Deferred tax liabilities: | | | | |
Depreciation and amortization | | $ | (10,107 | ) | | $ | (17,414 | ) |
Intangibles | | — |
| | (682 | ) |
Total deferred tax liabilities | | (10,107 | ) | | (18,096 | ) |
Net deferred tax | | $ | — |
| | $ | — |
|
We have provided a valuation allowance equal to our net deferred tax assets for the fiscal years ended March 31, 2017 and 2016. We are required to recognize all or a portion of our deferred tax assets if we believe that it is more likely than not that such assets will be realized, given the weight of all available evidence. We assess the realizability of the deferred tax assets at each interim and annual balance sheet date. In assessing the need for a valuation allowance, we considered both positive and negative evidence, including recent financial performance, projections of future taxable income and scheduled reversals of deferred tax liabilities. We increased the valuation allowance by $2.4 million and $16.0 million during the fiscal years ended March 31, 2017 and 2016, respectively. We will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results.
At March 31, 2017, we had Federal and state net operating loss carryforwards of approximately $250.3 million available in the United States of America ("US") and approximately $0.6 million in Australia to reduce future taxable income. The US federal and state net operating loss carryforwards will begin to expire in 2020. The Australian net operating loss carryforward does not expire.
At March 31, 2017, we had Federal and state capital loss carryforwards of approximately $11.4 million available to reduce future capital gains. The capital loss carryforwards were generated during the year ended March 31, 2014 and expires after the year ending March 31, 2019. During the year ended March 31, 2017, approximately $9.0 million of capital loss carryforwards that were generated during the year ended March 31, 2011, expired.
Under the provisions of the Internal Revenue Code, certain substantial changes in our ownership may result in a limitation on the amount of net operating losses that may be utilized in future years. As of March 31, 2017, approximately $12.6 million of net operating losses from periods prior to March 2006 are subject to an annual Section 382 limitation of approximately $12.6 million. Net operating losses of approximately $237.7 million, which were generated since March 2006 are currently not subject to an annual limitation under Section 382. Future significant ownership changes could cause a portion or all of these net operating losses to expire before utilization.
The differences between the United States statutory federal tax rate and our effective tax rate are as follows:
|
| | | | | |
| For the fiscal years ended March 31, |
| 2017 | | 2016 |
Provision at the U.S. statutory federal tax rate | 34.0 | % | | 34.0 | % |
State income taxes, net of federal benefit | 6.6 | % | | 5.6 | % |
Change in valuation allowance | (19.2 | )% | | (40.3 | )% |
Non-deductible equity compensation | (1.8 | )% | | (0.7 | )% |
Expired capital loss carry forward | (20.8 | )% | | — | % |
Other | (0.5 | )% | | 0.5 | % |
Income tax expense | (1.7 | )% | | (0.9 | )% |
Since April 1, 2007, we have applied accounting principles that clarify the accounting and disclosure for uncertainty in income taxes. As of March 31, 2017 and 2016, we did not have any uncertainties in income taxes.
We file income tax returns in the U.S. federal jurisdiction, various states and Australia. For federal income tax purposes, our fiscal 2014 through 2017 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. For state tax purposes, our fiscal 2013 through 2017 tax years generally remain open for examination by most of the tax authorities under a four-year statute of limitations. For Australian tax purposes, fiscal tax years ended March 31, 2016 and 2017 are open for examination.