8. Income Taxes

The reconciliation of our income tax provision to taxes computed at U.S. federal statutory rates is as follows:

	Year Ended March 31,

	2014			2013			2012
	(In thousands)
Income tax provision at statutory rates	$	688		$	554		$	663
State income taxes net of federal benefit		48			18			562
Tax credits		(290	)		(39	)		(246	)
Change in fair value of contingent acquisition consideration		8			(62	)		(211	)
Compensation charges		22			31			59
Unrecognized tax benefits		(4	)		—			(276	)
Change in valuation allowance		185			188			—
Other		47			26			92


Provision for income taxes	$	704		$	716		$	643

The components of deferred tax assets and liabilities are as follows:

	March 31,

	2014			2013
	(In thousands)
Deferred tax assets:
Net operating losses	$	5,835		$	7,031
Credit carry forwards		1,350			960
Deferred compensation and payroll		958			913
Bad debt allowance and other reserves		516			462
Deferred rent		165			315
Other, net		198			156


Total deferred tax assets		9,022			9,837
Valuation allowance		(373	)		(188	)


Total deferred tax assets, net of valuation allowance		8,649			9,649


Deferred tax liabilities:
Property and equipment		(285	)		(482	)
Acquired intangibles		(276	)		(535	)
Goodwill		(547	)		(381	)


Total deferred tax liabilities		(1,108	)		(1,398	)


Net deferred tax assets	$	7,541		$	8,251

The components of current and deferred federal and state income tax provisions and (benefits) are as follows:

	Year Ended March 31,

	2014		2013			2012
	(In thousands)
Current income tax provision (benefit):
Federal	$	21	$	(20	)	$	(221	)
State		20		99			208
Deferred income tax provision:
Federal		330		425			12
State		333		212			644


Net income tax provision	$	704	$	716		$	643

At March 31, 2014, we had approximately $838,000 in federal alternative minimum tax credit carryforwards that can be carried forward indefinitely. We had $18.6 million of federal net operating loss carryforwards at March 31, 2014 that begin to expire in 2021. We also had $8.0 million of state net operating loss carryforwards at March 31, 2014, of which, $7.8 million are scheduled to expire in 2015 and $160,000 are scheduled to expire in 2031.

Due to changes in stock ownership, our federal net operating loss carryforwards of approximately $18.6 million as of March 31, 2014 and other federal attributes are subject to an annual limitation under Section 382 of the Internal Revenue Code. As of March 31, 2014, based on the cumulative amount of tax attributes that have become available under the limitation imposed by Section 382, all of our net operating losses are now fully available for use. Our deferred tax assets at March 31, 2014 do not include approximately $958,000 of excess tax benefits from employee stock option exercises that are a component of our net operating loss carryforwards. If and when such excess tax benefits are realized, stockholders' equity will be increased.

As of March 31, 2014 and 2013, we recorded a valuation allowance against certain of our state net operating loss carryforwards which we estimated were likely to not be realized within the applicable carryforward period in the amount of $373,000 and $188,000, respectively, net of federal tax benefit. In making our determination as to the realizability of our deferred tax assets, we reviewed all available positive and negative evidence, including reversal of deferred tax liabilities, potential carrybacks, projected future taxable income, tax planning strategies and recent financial performance.

Unrecognized Tax Benefits

As of March 31, 2014 and 2013, our gross unrecognized tax benefits were $281,000 and $218,000, respectively, of which $217,000 and $115,000, respectively, if recognized, would affect our effective tax rate.

We recognize interest and/or penalties related to income tax matters in income tax expense. As of March 31, 2014 and 2013, we had accrued cumulatively $53,000 and $68,000, respectively, for the payment of potential interest and penalties.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

	Year Ended March 31,

	2014			2013			2012
	(In thousands)
Gross unrecognized tax benefits at beginning of year	$	218		$	1,692		$	1,941
Increases for tax positions taken in prior years		106			—			97
Decreases for tax positions taken in prior years		(53	)		(1,431	)		(10	)
Increases for tax positions taken in the current year		41			17			20
Lapse in statute of limitations		(31	)		(60	)		(356	)


Gross unrecognized tax benefits at March 31	$	281		$	218		$	1,692

As of March 31, 2012, our unrecognized tax benefits included $1.4 million related to estimated tax credit carryforwards which, if recognized, would have given rise to a deferred tax asset. As of March 31, 2013, we concluded that the information necessary to compute and substantiate the credits was not available or reasonably obtainable. As such, we will neither recognize a deferred tax asset for the estimated credit carryforwards, nor continue maintaining an offsetting amount of unrecognized tax benefits. We do not anticipate a significant change in gross unrecognized tax benefits within the next twelve months.

We are subject to taxation in the U.S. and various states. We are subject to U.S. federal tax examination for fiscal tax years ended March 31, 2011 or later, and state and local income tax examination for fiscal tax years ended March 31, 2010 or later.