INCOME TAXES
Loss before income taxes was derived from the following sources:
|
| | | | | | |
|
March 31, 2017 |
March 31, 2016 |
United States | $ | (14,312 | ) | $ | (5,002 | ) |
Foreign | (5,411 | ) | 1,002 |
|
| $ | (19,723 | ) | $ | (4,000 | ) |
The components of the provision (benefit) for income taxes are as follows:
|
| | | | | | |
|
March 31, 2017 |
March 31, 2016 |
Current: | | |
Federal | $ | — |
| $ | — |
|
State and local | (3 | ) | 17 |
|
Foreign | (33 | ) | 34 |
|
Deferred: | |
| |
|
Federal | — |
| — |
|
State and local | (67 | ) | (106 | ) |
Foreign | (1,392 | ) | 287 |
|
| $ | (1,495 | ) | $ | 232 |
|
The total provision (benefit) for income taxes differs from that amount which would be computed by applying the U.S. Federal and Canadian income tax rates to income (loss) before provision for income taxes as follows:
|
| | | | | | |
| Year ended
March 31, 2017 | Year ended
March 31, 2016 |
Statutory U.S. federal income tax (benefit) rate | 34.0 | % | | 34.0 | % | |
State income taxes | 0.3 | % | | 2.4 | % | |
Foreign income taxes | (2.0 | )% | | 0.6 | % | |
Imputed interest income | (1.6 | )% | | (9.0 | )% | |
Federal valuation allowance | (22.6 | )% | | (27.0 | )% | |
Foreign Permanent Items/Other | (0.5 | )% | | (6.8 | )% | |
Effective income tax rate | 7.6 | % | | (5.8 | )% | |
The primary reason the effective income tax rate for fiscal year 2017 is higher than the effective income tax benefit for fiscal year 2016 is due to the changes in the Federal U.S. and foreign valuation allowances, imputed interest income and other foreign permanent items.
In November 2015, the FASB issued Accounting Standards Update 2015-17 that requires deferred tax assets and liabilities to be classified as non-current in the balance sheet. The guidance is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2016, with early adoption permitted. The Company elected to early adopt the guidance during the fourth quarter of the year ended March 31, 2016. All deferred assets and liabilities have been classified as non-current beginning for the period ending March 31, 2016, and forward.
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7. | INCOME TAXES (continued) |
The significant components of long-term deferred tax assets and liabilities are as follows:
|
| | | | | | | |
| | March 31, 2017 | March 31, 2016 |
Long-term deferred tax assets | | |
| Operating loss carry forwards | $ | 30,370 |
| $ | 24,586 |
|
| Net deferred foreign exchange | 1,391 |
| 1,321 |
|
| Other | 1,087 |
| 958 |
|
| | 32,848 |
| $ | 26,865 |
|
Valuation Allowance | (15,573 | ) | (10,239 | ) |
Net long-term deferred tax assets | 17,275 |
| $ | 16,626 |
|
Long-term deferred tax liabilities | | |
| Depreciation | (19,807 | ) | $ | (19,332 | ) |
| Separately identifiable intangibles | (1,835 | ) | (2,991 | ) |
| Other | — |
| (128 | ) |
Total long-term deterred tax liabilities | (21,642 | ) | $ | (22,451 | ) |
Net long-term deferred tax liabilities | $ | (4,367 | ) | $ | (5,825 | ) |
The Company has net long-term deferred tax liabilities of $173 ($241 as of March 31, 2016) in the U.S. federal and state jurisdictions and net long-term deferred tax liabilities of $4,194 ($5,584 as of March 31, 2016) in Canadian jurisdictions. The Company establishes a valuation allowance when it is more likely than not that it will not be able to realize the benefit of the deferred tax assets, or when future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on management’s assessment of realizable deferred tax assets.
The Company determined at March 31, 2014 that its U.S. federal net deferred tax assets, including net operating loss carry-forwards, would not fully be utilized due to a cumulative break-even position over the prior three fiscal years, coupled with anticipated cumulative three year losses in the near future. As such, the Company recorded a full valuation allowance against the net U.S. Federal deferred tax assets.
The Company's position remains unchanged at March 31, 2017 as it relates to the U.S. federal net deferred tax assets, thus a full valuation allowance against the net U.S. Federal, net deferred tax assets continues in existence, resulting in an increase of the valuation allowance by $4,456 during the year ended March 31, 2017 and $1,100 during the year ended March 31, 2016.
The Company determined at March 31, 2015 that the Canadian deferred income tax asset relating to non-capital losses on Lower Lakes Towing would be realized based on performance of the entity and the expected timing of the reversal of the deferred tax liabilities. The Company determined that the deferred income tax assets relating to capital losses and unrealized foreign exchange losses in Lower Lakes Towing would not be realized. As such, a full valuation allowance was recorded against capital losses and unrealized foreign exchange losses in Lower Lakes Towing. The Company also determined that the Canadian deferred income tax assets on Lower Lakes Ship Repair would not be realized based on the uncertainty of future income. As such, a full valuation allowance was recorded against Lower Lakes Ship Repair's deferred tax assets. The Company's position remains unchanged at March 31, 2017 as it relates to the Canadian net deferred tax assets.
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7. | INCOME TAXES (continued) |
For state tax purposes, the Company is in a net deferred tax liability position of $173 at March 31, 2017, and in a net deferred tax liability position of $241 at March 31, 2016. The net deferred tax positions include valuation allowances of $882 and $339 at March 31, 2017 and March 31, 2016, respectively. In determining the valuation allowance, the Company considered the reversing patterns of tax liabilities on a separate jurisdiction basis and it is expected that a portion of these liabilities will reverse within the period of time available to offset existing deferred tax assets including net operating loss carry-forwards. The Company recorded an increase in the state valuation allowance of $543 during the year ended March 31, 2017.
At March 31, 2017, the Company had unused U.S. federal net operating loss carry-forwards totaling $70,833 that expire between fiscal 2020 and 2037, of which a small portion is subject to Internal Revenue Code section 382 annual limitations. At March 31, 2017, the Company also had unused Canadian net operating loss carry-forwards totaling CDN $21,640 that expire between fiscal 2027 and 2037.