Entity information:

Components of the provision for income taxes for the years ended May 31, 2017, 2016 and 2015, were as follows:

 

   2017  2016  2015
Current tax (benefit) expense:               
  Federal  $(2,270)  $(1,579)  $5,216 
  State   95    64    751 
    (2,175)   (1,515)   5,967 
                
Deferred tax (benefit) expense:               
  Federal   733    (1,183)   (1,396)
  State   (108)   (196)   (138)
    625    (1,379)   (1,534)
Total tax (benefit) expense  $(1,550)  $(2,894)  $4,433 

 

The effective tax rate varies from the statutory federal income tax rate for the following reasons:

 

   2017  2016  2015
          
Statutory   (34.0)%   (34.0)%   34.0%
State income taxes — net of federal benefit   (0.6)   (1.9)   3.6
Deferred tax valuation allowance   15.6   0.0   0.0
Permanent differences and other   (0.9)   0.6   2.0
Effective income tax rate   (19.9)%   (35.3)%   39.6%

 

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets (liabilities) as of May 31 were as follows:

 

   2017  2016
Deferred income tax assets:          
  Account receivable allowances  $493   $317 
  Bad debt write-offs   1,521    2,131 
  Other   32    60 
  Accrued salaries   612    623 
  Start up costs   217    246 
  Capital lease obligations   4,338    4,445 
  Net operating loss carryforwards - expires 2021-2037   243    155 
  Deferred rent   1,841    2,037 
           Total deferred income tax assets   9,297    10,014 
  Valuation allowance   (1,222)   0 
           Net deferred income tax assets   8,075    10,014 
           
Deferred income tax liabilities:          
  Fixed assets and course development   (7,689)   (9,133)
  Prepaid expenses   (564)   (450)
  Other   (16)   0 
           Total deferred income tax liabilities   (8,269)   (9,583)
Net deferred income tax (liabilities) assets  $(194)  $431 

 

The Company has determined that it is more likely than not that it will not realize its deferred tax asset. As such, a valuation allowance totaling $1,222 is recorded at May 31, 2017 and is included in deferred income taxes liability in the accompanying consolidated balance sheet. A primary factor in the assessment of this non-cash charge is that the Company is in a cumulative loss position over the three-year period ended May 31, 2017.

 

The Company follows the guidance of ASC Topic 740, Income Taxes, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, which requires that income tax positions must be more likely than not to be sustained based solely on their technical merits in order to be recognized. The Company has recorded no liability for uncertain tax positions. In the event the Company had uncertain tax positions, the Company would elect to record interest and penalties from unrecognized tax benefits in the tax provision.

 

The Company files income tax returns in the U.S. federal jurisdiction and various states. Because of closure of an Internal Revenue Service examination, the Company is generally no longer subject to U.S. federal income tax or state and local tax examinations for years before 2012.