Income Taxes

12 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As discussed in Note 1, the Company adopted ASU 2023-02, Investments- Equity Method and Joint Ventures, on a modified retrospective basis effective April 1, 2022. Prior to the adoption of this pronouncement, the Company recognized its HTC investment under the flow through method over the five-year investment period on a straight-line basis as a component of other expense. With the adoption of this ASU, the Company now recognizes the investment of the HTC under the proportional amortization method which allows the investment to be recognized in proportion to the tax credit as a component of income tax expense. During the current fiscal year, the Company recorded a cumulative adjustment of $1.9 million to the opening balance of retained earnings, which represents the net difference between the investment amortization under the two methods through the April 1, 2022 adoption date. As of March 31, 2023, Investment in HTC was $23.0 million, which is included as a component of Other assets, net in the Consolidated Balance Sheets. For the fiscal year ended March 31, 2023, the Company recognized net amortization of $2.1 million and $1.9 million of tax benefits from these investments in income tax expense and also recognized the $1.9 million of tax benefits from these investments in Income taxes payable in the Consolidated Statements of Cash Flows. The Company did not recognize any non-tax related activity or have any significant modifications to its investments during the current fiscal year.

Income tax expense (benefit) consists of:

	Current		Deferred	Total
Year ended March 31, 2023
Federal	$	7,135,030	(1,430,623)	5,704,407
State and local	880,838		(671,462)	209,376
	$	8,015,868	(2,102,085)	5,913,783
Year ended March 31, 2022
Federal	$	22,262,110	(11,892,354)	10,369,756
State and local	4,206,087		(2,916,361)	1,289,726
	$	26,468,197	(14,808,715)	11,659,482
Year ended March 31, 2021
Federal	$	16,443,592	4,077,609	20,521,201
State and local	1,025,645		1,573,753	2,599,398
	$	17,469,237	5,651,362	23,120,599

The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported income tax expense for March 31, 2023, 2022 and 2021 are summarized as follows:

	2023		2022		2021
Expected income tax	$	5,700,613	$	13,771,657	$	23,394,720
Increase (reduction) in income taxes resulting from:
State tax (excluding state tax credits), net of federal benefit	328,026		1,489,800		2,053,524
Federal tax credits, net	(200,203)		(1,193,021)		(1,173,435)
State tax credits	(162,619)		(470,916)		—
Uncertain tax positions	(1,151,234)		(555,252)		(2,107,263)
Executive compensation limitation under Section 162(m)	732,504		1,918,618		1,203,203
Excess tax benefits related to equity compensation	(73,644)		(3,237,682)		(996,769)
Other, net	740,340		(63,722)		746,619
	$	5,913,783	$	11,659,482	$	23,120,599

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2023 and 2022 are presented below:

	2023		2022
Deferred tax assets:
Allowance for credit losses	$	31,239,616	$	33,481,188
Unearned insurance commissions	14,589,099		15,453,501
Accrued expenses primarily related to employee benefits	12,444,567		12,549,474
Reserve for uncollectible interest	1,124,879		1,261,035
Lease liability	20,675,974		21,575,596
Intangible assets	660,312		254,986
Foreign tax credit carryforward	3,254,926		3,254,926
Capital loss carryforward	7,966,326		7,966,326
State net operating loss carryforwards	4,851,747		3,849,158
Gross deferred tax assets	96,807,446		99,646,190
Less valuation allowance	(15,209,271)		(14,723,244)
Net deferred tax assets	81,598,175		84,922,946
Deferred tax liabilities:
Fair value adjustment for loans receivable	(11,371,461)		(13,896,840)
Property and equipment	(4,611,006)		(4,875,859)
Deferred loan origination costs	(1,212,809)		(1,708,369)
Prepaid expenses	(1,766,564)		(1,785,906)
Right-of-use asset	(20,072,506)		(21,273,281)
Other	(841,468)		(1,581,234)
Gross deferred tax liabilities	(39,875,814)		(45,121,489)
Deferred income taxes, net	$	41,722,361	$	39,801,457

At March 31, 2023, the Company had state net operating loss carryforwards of approximately $84.7 million. A deferred tax asset of approximately $4.9 million was recorded to reflect the benefit of these losses. Of this $4.9 million, $0.9 million is expected to be recognized. Approximately $1,000 of the state net operating loss carryforward will expire in 2025 with the remaining carryforward expiring between 2031 and 2041.

The valuation allowance for deferred tax assets increased by $0.5 million for the year ended March 31, 2023 when compared to March 31, 2022. The valuation allowance at March 31, 2023 and 2022 was $15.2 million and $14.7 million, respectively. The valuation allowance against the total deferred tax assets as of March 31, 2023 consisted of $4 million from state net operating loss carryforwards in the amount of $63 million which expire from 2025 to 2041, 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, $7.7 million related to the $37.0 million capital loss carryforward from the sale of the Mexican operations in fiscal 2019 which expires in 2024 and $0.2 million related to the $0.9 million capital loss on the sale of the former headquarters buildings which expire from 2026 to 2027. The Company does not expect to generate enough foreign source income, state taxable income in the respective jurisdictions 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.  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.   

As of March 31, 2023, 2022, and 2021, the Company had $1.1 million, $2.2 million, and $3.1 million of total gross unrecognized tax benefits including interest, respectively. Of these totals, approximately $0.9 million, $2.0 million, and $2.6 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, 2023, 2022, and 2021 are presented below:

	2023		2022		2021
Unrecognized tax benefit balance beginning of year	$	1,616,116	$	1,811,244	$	4,351,811
Gross increases for tax positions of current year	129,146		153,754		36,541
Settlements with tax authorities	—		—		(1,968,702)
Lapse of statute of limitations	(927,037)		(348,882)		(608,406)
Unrecognized tax benefit balance end of year	$	818,225	$	1,616,116	$	1,811,244

At March 31, 2023, approximately $0.5 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, 2023, 2022, and 2021, the Company had $0.3 million, $0.6 million, and $1.2 million accrued for gross interest, respectively, of which $0.1 million, $0.2 million, and $0.3 million represented the current period expense for the periods ended March 31, 2023, 2022, and 2021.

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 2018, although carryforward attributes that were generated prior to 2018 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period.