Income Taxes

12 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the TCJA. The TCJA included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time repatriation tax on deferred foreign income (“Transition Tax”), deductions, credits and business-related exclusions.

The impact of changes in federal tax rates on deferred tax amounts and the effect of the Transition Tax are significant unusual or infrequent events which are recognized as discrete items in the Company’s income tax expense in the period in which the event occurs. The Company recorded a $10.5 million increase in tax expense related to the net impact of revaluing the U.S. deferred tax assets and liabilities in the third quarter of fiscal 2018. An adjustment was made in the third quarter of fiscal 2019 to record an $850.0 thousand tax benefit related to the revaluing of the U.S. deferred tax assets and liabilities due to additional analysis and change in estimate from the original calculation. The Company also recorded an increase in tax expense of $4.9 million related to the foreign Transition Tax during the final quarter of fiscal 2018.

Because of the Transition Tax, the Company's tax basis was greater than its book basis. The recognition of the basis difference upon the sale of the Mexican operations in fiscal 2019 created a capital loss that the Company does not believe will be recognized in the carryforward period; therefore, a full tax valuation allowance was recorded against the recognized loss carryforward.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, expands current benefits of net operating losses and increases the allowable business interest deduction under Section 163(j). The CARES Act did not have a material impact on the Company's income tax position.

Income tax expense (benefit) from continuing operations consists of:

	Current		Deferred	Total
Year ended March 31, 2021
Continuing Operations- Federal	$	16,443,592	4,077,609	20,521,201
Continuing Operations- State and local	1,025,645		1,573,753	2,599,398
	$	17,469,237	5,651,362	23,120,599
Year ended March 31, 2020
Continuing Operations- Federal	$	3,307,872	(224,604)	3,083,268
Continuing Operations- State and local	2,871,179		797,518	3,668,697
	$	6,179,051	572,914	6,751,965
Year ended March 31, 2019
Continuing Operations- Federal	$	20,508,247	(1,833,943)	18,674,304
Continuing Operations- State and local	(871,439)		(1,821,808)	(2,693,247)
	$	19,636,808	(3,655,751)	15,981,057

The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported income tax expense from continuing operations for March 31, 2021, 2020 and 2019 are summarized as follows:

	2021		2020	2019
Expected income tax	$	23,394,720	7,330,983	18,874,500
Increase (reduction) in income taxes resulting from:
State tax (excluding state tax credits), net of federal benefit	2,053,524		3,398,271	1,576,915
Federal tax credits (net)	(1,173,435)		(7,616,236)	—
State tax credits	—		(500,000)	(3,704,580)
Revalue deferred tax assets and liabilities	—		—	(852,523)
Uncertain tax positions	(2,107,263)		(167,455)	(183,929)
Nondeductible penalties	8,274		4,562,830	2,210
Executive compensation limitation under Section 162(m)	1,203,203		1,305,975	37,457
Excess tax benefits related to equity compensation	(996,769)		(612,987)	(287,703)
Prior year adjustments	(30,953)		(672,358)	106,075
Other, net	769,298		(277,058)	412,635
	$	23,120,599	6,751,965	15,981,057

The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported income tax expense from discontinued operations for March 31, 2021, 2020 and 2019 are summarized as follows:

	2021		2020	2019
Expected income tax	$	—	—	491,783
Increase (reduction) in income taxes resulting from:
Foreign income adjustments	—		—	187,974
Other, net	—		—	(53,174)
	$	—	—	626,583

The tax effects of temporary differences from continuing operations that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2021 and 2020 are presented below:

	2021		2020
Deferred tax assets:
Allowance for credit losses	$	22,908,670	23,900,236
Unearned insurance commissions	10,080,766		9,964,655
Accrued expenses primarily related to employee benefits	13,676,701		12,730,245
Reserve for uncollectible interest	645,113		1,205,082
Lease liability	22,231,591		25,309,841
Foreign tax credit carryforward	3,254,926		3,254,926
Capital loss carryforward	7,928,184		7,784,059
State net operating loss carryforwards	78,358		387,558
Gross deferred tax assets	80,804,309		84,536,602
Less valuation allowance	(11,184,384)		(11,040,259)
Net deferred tax assets	69,619,925		73,496,343
Deferred tax liabilities:
Fair value adjustment for loans receivable	(12,362,590)		(14,065,135)
Property and equipment	(5,902,421)		(5,097,147)
Intangible assets	(243,574)		(925,319)
Deferred net loan origination costs	(1,268,653)		(1,664,486)
Prepaid expenses	(1,412,337)		(1,185,759)
Right-of-use asset	(21,826,178)		(25,045,690)
Other	(1,611,430)		(2,254,822)
Gross deferred tax liabilities	(44,627,183)		(50,238,358)
Deferred income taxes, net	$	24,992,742	23,257,985

At March 31, 2021, the Company had state net operating loss carryforwards of approximately $2.2 million. A deferred tax asset of approximately $0.1 million has been recorded to reflect the benefit of these losses that the Company expects to be recognized. Approximately $1,000 of the state net operating loss carryforward will expire in 2025 with the remaining carryforward expiring between 2036 and 2039.

The valuation allowance for deferred tax assets increased by $144,125 for the year ended March 31, 2021 when compared to March 31, 2020. The valuation allowance at March 31, 2021 and 2020 was $11.2 million and $11.0 million, respectively.  The valuation allowance against the total deferred tax assets as of March 31, 2021 consisted of $1,274 related to state of Colorado net operating loss carryforwards in the amount of $54,318, which expire in 2025, a foreign tax credit carryforward of $3.3 million arising in relation to the Section 965 calculation ("Transition Tax") during fiscal 2018 which expires in 2028, and $7.9 million related to the $37.1 million capital loss carryforward from the sale of the Mexican operations in fiscal 2019 which expires in 2024 and $0.7 million related to the sale of the former headquarters building which expires in 2026.  The Company does not expect to generate enough foreign source income or capital gains in future tax years to realize these tax attributes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.   In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of the appropriate character prior to the expiration of the deferred tax assets governed by the tax code.   Based upon the level of historical taxable income and projections for future taxable income over the periods in which the related temporary differences are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at March 31, 2021.  The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

As of March 31, 2021, 2020, and 2019, the Company had $3.1 million, $5.8 million, and $5.8 million of total gross unrecognized tax benefits including interest, respectively.  Of these totals, approximately $2.6 million, $5.2 million, and $5.4 million, respectively, represents the amount of net unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits at March 31, 2021, 2020, and 2019 are presented below:

	2021		2020	2019
Unrecognized tax benefit balance beginning of year	$	4,351,811	4,043,623	6,946,229
Gross increases for tax positions of current year	36,541		246,725	54,025
Gross increases (decreases) for tax positions of prior years	—		786,674	(138,405)
Settlements with tax authorities	(1,968,702)		—	(1,356,714)
Lapse of statute of limitations	(608,406)		(725,211)	(1,461,512)
Unrecognized tax benefit balance end of year	$	1,811,244	4,351,811	4,043,623

At March 31, 2021, approximately $0.7 million of gross unrecognized tax benefits are expected to be resolved during the next 12 months through settlements with taxing authorities or the expiration of the statute of limitations. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.  As of March 31, 2021, 2020, and 2019, the Company had $1.2 million, $1.4 million, and $1.8 million accrued for gross interest, respectively, of which $0.3 million, $(0.1) million, and $1.1 million represented the current period expense for the periods ended March 31, 2021, 2020, and 2019.

The Company is subject to U.S. income tax, as well as various other state and local jurisdictions. With the exception of a few states, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2016, although carryforward attributes that were generated prior to 2016 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period.