INCOME TAXES

12 Months Ended

Mar. 31, 2023

INCOME TAXES [Abstract]

INCOME TAXES

14. INCOME TAXES

We account for our tax positions in accordance with Codification Topic 740. 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.

As of March 31, 2023, we do not have any unrecognized tax benefits for uncertain tax positions. As of March 31, 2022, our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible. We recognize accrued interest and penalties related to unrecognized tax benefits as part of income tax expense.

We file income tax returns, including returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. The tax years ended March 31, 2020, March 31, 2021, and March 31, 2022, are subject 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.

A reconciliation of income taxes computed at the statutory federal income tax rate of 21.0% to the provision for income taxes included in the consolidated statements of operations is as follows (in thousands, except percentages):

	Year Ended March 31,
	2023			2022			2021
Income tax expense computed at the U.S. statutory federal rate	$	34,224		$	30,845		$	22,450
State income tax expense—net of federal benefit		8,754			8,937			6,941
Non-deductible executive compensation		1,708			1,749			2,052
Other		(1,068	)		(247	)		1,066
Provision for income taxes	$	43,618		$	41,284		$	32,509
Effective income tax rate		26.8	%		28.1	%		30.4	%

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

	Year Ended March 31,
	2023			2022			2021
Current:
Federal	$	30,928		$	32,309		$	26,054
State		10,110			11,681			9,882
Foreign		499			894			770
Total current expense		41,537			44,884			36,706
Deferred:
Federal		1,301			(3,289	)		(3,067	)
State		970			(370	)		(1,096	)
Foreign		(190	)		59			(34	)
Total deferred expense (benefit)		2,081			(3,600	)		(4,197	)
Provision for income taxes	$	43,618		$	41,284		$	32,509

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,
	2023			2022
Deferred tax assets:
Accrued vacation	$	2,251		$	2,391
Deferred revenue		5,448			5,090
Allowance for credit losses		1,063			951
Restricted stock		654			616
Other deferred tax assets		1,697			743
Accrued bonus		2,323			2,532
Lease liabilities		3,939			1,857
Other credits and carryforwards		277			249
Gross deferred tax assets		17,652			14,429
Less: valuation allowance		(112	)		(250	)
Net deferred tax assets		17,540			14,179
Deferred tax liabilities:
Property and equipment		(2,926	)		(2,295	)
Operating leases		(3,789	)		(2,759	)
Prepaid expenses		(1,729	)		(887	)
Right-of-use assets		(3,885	)		(1,869	)
Tax deductible goodwill		(2,244	)		(1,319	)
Total deferred tax  liabilities		(14,573	)		(9,129	)
Net deferred tax asset	$	2,967		$	5,050

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. Based on this evaluation as of March 31, 2023, a valuation allowance of $0.1 million was recorded, to offset gross deferred tax assets primarily attributable to net operating losses at certain of the foreign subsidiaries and foreign tax credit carry forwards. We believe that it is more likely than not that we will realize the remaining gross deferred tax assets through generating taxable income or the reversal of existing temporary differences attributable to the gross deferred tax liabilities.