12.	INCOME TAXES

We account for our tax positions in accordance with Codification Topic Income Taxes. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely of being sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.

Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of March 31, 2018, and March 31, 2017. We had no additions or reductions to our gross on certain income tax positions during the year ended March 31, 2018. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

We file income tax returns, including returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. Tax years 2015, 2016 and 2017 are subjected to examination by federal and state taxing authorities. Various state and local income tax returns are also under examination by taxing authorities. We do not believe that the outcome of any examination will have a material impact on our financial statements.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that will affect our fiscal year ended March 31, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate, and (2) bonus depreciation that will allow for full expensing of qualified property. The Tax Act reduces the federal corporate tax rate to 21 percent in the fiscal year ending March 31, 2018. Section 15 of the Internal Revenue Code stipulates that our fiscal year ending March 31, 2018, will have a blended corporate tax rate of 31.5 percent, which is based on the applicable tax rates before and after the Tax Act and the number of days in the year.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

Our accounting for the effect of the Tax Act is complete. We have recorded a net benefit to tax expense of $1.7 million.

A reconciliation of income taxes computed at the statutory federal income tax rate of 31.5% to the provision for income taxes included in the consolidated statements of operations is as follows (in thousands, except percentages):

	Year Ended March 31,
	2018			2017			2016

Statutory federal income tax rate		31.5	%		35.0	%		35.0	%
Income tax expense computed at the U.S. statutory federal rate	$	26,505		$	30,134		$	26,513
Effect of federal reduction of statutory rate	$	(1,654	)
State income tax expense—net of federal benefit		3,842			4,193			3,544
Non-deductible executive compensation		658			512			331
Other		(582	)		717			616
Provision for income taxes	$	28,769		$	35,556		$	31,004
Effective income tax rate		34.3	%		41.3	%		40.9	%

The components of the provision for income taxes are as follows (in thousands):

	Year Ended March 31,
	2018			2017			2016
Current:
Federal	$	23,196		$	29,619		$	21,361
State		5,377			7,001			6,114
Foreign		240			132			13
Total current expense		28,813			36,752			27,488

Deferred:
Federal		(611	)		(622	)		3,727
State		154			(432	)		(211	)
Foreign		413			(142	)		-
Total deferred expense (benefit)		(44	)		(1,196	)		3,516

Provision for income taxes	$	28,769		$	35,556		$	31,004

Deferred income taxes reflect the net 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 our deferred tax assets and liabilities were as follows (in thousands):

	March 31,
	2018			2017
Deferred Tax Assets:
Accrued vacation	$	1,596		$	2,217
Deferred revenue		668			3,107
Foreign net operating loss carryforward		-			462
Reserve for credit losses		607			2,026
Restricted stock		1,270			1,779
Other accruals and reserves		1,497			2,555
Other credits and carryforwards		1,335			1,166
Gross deferred tax assets		6,973			13,312
Less: valuation allowance		(1,335	)		(1,270	)
Net deferred tax assets		5,638			12,042

Deferred Tax Liabilities:
Basis difference in fixed assets		(1,570	)		(1,399	)
Basis difference in operating leases		(4,517	)		(9,926	)
Basis difference in tax deductible goodwill		(1,213	)		(2,516	)
Total deferred tax liabilities		(7,300	)		(13,841	)

Net deferred tax liabilities	$	(1,662	)	$	(1,799	)

The effective income tax rate for the year ended March 31, 2018 was 34.3%, compared to 41.3% of the previous fiscal year.

As of March 31, 2018, we have state capital loss carryforwards of approximately $1.3 million, which have been fully reserved. The valuation allowance resulted from management's determination, based on available evidence, that it was more likely than not that the state capital loss deferred tax asset balance may not be realized. If not realized, the state capital loss carryforwards will generally expire in 5 years.

As of March 31, 2017, we have a foreign net operating loss of approximately $0.5 million related to operations in the United Kingdom. As of March 31, 2018, we expect to utilize all of the net operating loss. No valuation allowance was recognized as a result of management's determination, based on available evidence, that it was more likely than not that the foreign net operating loss deferred tax asset balance will be realized. The foreign net operating loss is not set to expire.