Income Taxes

12 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company adopted ASU 2023-02, Investments- Equity Method and Joint Ventures, on a modified retrospective basis in March 2023 with an effective date of 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 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. In fiscal 2023, 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, 2024 and 2023, investment in HTC was $24.8 million and $23.0 million, respectively, which is included as a component of Other assets, net and Accounts payable and accrued expenses in the Consolidated Balance Sheets. The Company recognized net amortization from these investments of $8.8 million and $2.1 million for the years ended March 31, 2024 and 2023, respectively, in income tax expense. The Company recognized tax benefits from these investments of $9.7 million and $1.9 million during the years ended March 31, 2024 and 2023, respectively, in income tax expense and 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, 2024
Federal	$	9,592,743	$	8,325,695	$	17,918,438
State and local	1,732,162		2,411,909		4,144,071
	$	11,324,905	$	10,737,604	$	22,062,509
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

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, 2024, 2023 and 2022 are summarized as follows:

	2024		2023		2022
Expected income tax	$	20,875,624	$	5,700,613	$	13,771,657
Increase (reduction) in income taxes resulting from:
State tax (excluding state tax credits), net of federal benefit	3,513,226		328,026		1,489,800
Federal tax credits, net	(1,034,091)		(200,203)		(1,193,021)
State tax credits	(239,410)		(162,619)		(470,916)
Uncertain tax positions	(16,802)		(1,151,234)		(555,252)
Expiration of capital loss carryforward	7,773,559		—		—
Executive compensation limitation under Section 162(m)	62,686		732,504		1,918,618
Excess tax benefits related to equity compensation	(347,806)		(73,644)		(3,237,682)
Decrease in valuation allowance related to capital loss carryforward	(7,773,559)		—		—
Prior year adjustments	(1,135,270)		238,187		(51,728)
Other, net	384,352		502,153		(11,994)
	$	22,062,509	$	5,913,783	$	11,659,482

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2024 and 2023 are presented below:

	2024		2023
Deferred tax assets:
Allowance for credit losses	$	25,538,524	$	31,239,616
Unearned insurance commissions	10,944,327		14,589,099
Accrued expenses primarily related to employee benefits	10,234,369		12,444,567
Reserve for uncollectible interest	990,192		1,124,879
Lease liability	20,217,720		20,675,974
Intangible assets	1,701,995		660,312
Foreign tax credit carryforward	3,254,926		3,254,926
Capital loss carryforward	192,767		7,966,326
State net operating loss carryforwards	5,481,746		4,851,747
Gross deferred tax assets	78,556,566		96,807,446
Less valuation allowance	(8,094,712)		(15,209,271)
Net deferred tax assets	70,461,854		81,598,175
Deferred tax liabilities:
Fair value adjustment for loans receivable	(12,357,392)		(11,371,461)
Property and equipment	(3,912,030)		(4,611,006)
Deferred loan origination costs	(1,239,726)		(1,212,809)
Prepaid expenses	(1,662,717)		(1,766,564)
ROU assets	(19,619,875)		(20,072,506)
Other	(727,270)		(841,468)
Gross deferred tax liabilities	(39,519,010)		(39,875,814)
Deferred income taxes, net	$	30,942,844	$	41,722,361

At March 31, 2024, the Company had state net operating loss carryforwards of approximately $94.4 million. A deferred tax asset of approximately $5.5 million was recorded to reflect the benefit of these losses. Of this $5.5 million, $0.8 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 2042.

The valuation allowance for deferred tax assets decreased by $7.1 million for the year ended March 31, 2024 when compared to March 31, 2023. The valuation allowance at March 31, 2024 and 2023 was $8.1 million and $15.2 million, respectively. The valuation allowance against the total deferred tax assets as of March 31, 2024 consisted of $4.6 million from state net operating loss carryforwards in the amount of $73.6 million which expire from 2025 to 2042, 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 $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, 2024, 2023, and 2022, the Company had $1.1 million, $1.1 million, and $2.2 million of total gross unrecognized tax benefits including interest, respectively. Of these totals, approximately $0.9 million, $0.9 million, and $2.0 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, 2024, 2023, and 2022 are presented below:

	2024		2023		2022
Unrecognized tax benefit balance beginning of year	$	818,225	$	1,616,116	$	1,811,244
Gross increases for tax positions of current year	105,531		129,146		153,754
Lapse of statute of limitations	(175,467)		(927,037)		(348,882)
Unrecognized tax benefit balance end of year	$	748,289	$	818,225	$	1,616,116

At March 31, 2024, approximately $0.4 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, 2024, 2023, and 2022, the Company had $0.3 million, $0.3 million, and $0.6 million accrued for gross interest, respectively, of which $0.1 million, $0.1 million, and $0.2 million represented the current period expense for the periods ended March 31, 2024, 2023, and 2022, respectively.

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 2019, although carryforward attributes that were generated prior to 2019 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period.