Income Taxes

12 Months Ended

Mar. 31, 2020

INCOME TAXES

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


	2020						2019
$ in thousands	Amount		Percent		Amount		Percent
Statutory Federal income tax expense (benefit)	$	(1,139)	21.0	%	$	(1,218)	21.0	%
State and local income tax, net of Federal tax benefit	(719)		13.2		(28)		0.4
Impact of income tax rate changes	186		(3.4)		—		—





Change in valuation allowance	1,661		(30.6)		1,332		(23.0)
Other	11		(0.2)		(86)		1.6
Total income tax expense (benefit)	$	—	—	%	$	—	—	%

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	2020		2019
Deferred Tax Assets:
Allowance for loan losses	$	1,689	$	1,561


Nonaccrual loan interest	40		41
Deferred gain - sale leaseback transactions	—		1,803
Net operating loss carryforward	18,732		16,248
New markets tax credit	3,452		3,452
AMT credits	—		170
Depreciation	(5)		821



Unrealized (gain) loss on available-for-sale securities	(313)		1,092
Other	124		—
Total Deferred Tax Assets	23,719		25,188
Deferred Tax Liabilities:


Other	1,098		1,073
Total Deferred Tax Liabilities	1,098		1,073
Deferred Tax Assets, net	22,621		24,115
Valuation Allowance	(22,621)		(23,945)
Deferred Tax Assets, net of valuation allowance	$	—	$	170

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 is currently subject to an annual limitation of approximately $870 thousand, but has accumulated availability of $7.6 million as of March 31, 2020. The total cumulative availability over the carryover period (20 years) is $18.1 million. The Company has a net deferred tax asset (“DTA”) of approximately $22.6 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 valuation allowance for net deferred tax asset of $22.6 million has been recorded. The valuation allowance was initially recorded during fiscal year 2011, and has remained through March 31, 2020, as management concluded, and continues to conclude, that it is “more likely than not” that the Company will not be able to fully realize the benefit of its deferred tax assets. The Tax Cuts and Jobs Act, that was passed during the Company's fiscal year 2018, now permits a corporation to receive refunds for AMT credits even if there is no taxable income. As a result, at March 31, 2018, the valuation allowance was reduced by $340 thousand, the amount of the Company's AMT credits. The amount of the AMT credits recorded as a deferred tax asset was $0 as of March 31, 2020, and $170 thousand as of March 31, 2019.

At March 31, 2020, the Company had net operating carryforwards for federal purposes of approximately $51.2 million, for state purposes of approximately $69.5 million and for city purposes of approximately $57.2 million which are available to offset future federal, state and city income and which expire over varying periods from March 2030 through March 2040. Federal net operating carryforwards of $17.3 million do not expire.

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, 2017. 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.