Income Taxes

12 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”). The IRA 2022, among other tax provisions, imposes a 15% corporate alternative minimum tax based on financial statement income, effective for tax years beginning after December 31, 2022. The IRA 2022 also establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases after December 31, 2022. The IRA 2022 did not impact the Company’s current year tax provision or the Company’s consolidated financial statements.

The Company files a consolidated federal income tax return and various state income tax returns. The amount of income taxes the Company records requires the interpretation of complex rules and regulations of federal and state taxing jurisdictions. With few exceptions, the earliest year open to examination by U.S. federal and state income tax jurisdictions is 2019.

The income tax provision consists of the following for the years months ended March 31, 2024 and 2023:

	Year Ended
	March 31
	2024		2023
Current income tax expense:
Federal	$	189,254	$	-
State		119,629		164,510
Total current income tax expense	$	308,883	$	164,510
Deferred income tax expense:
Federal		311,661		-
State		-		-
Total deferred income tax expense	$	311,661	$	-
Total income tax expense:	$	620,544	$	164,510

Federal income tax for the year ended March 31, 2024 was $500,915. There was no federal income tax expense for the year ended March 31, 2023 because the Company was in a net deferred tax asset position.

GAAP requires deferred income tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Significant components of net deferred tax assets (liabilities) at March 31 are as follows:

	2024		2023
Deferred tax assets:
Percentage depletion carryforwards	$	1,281,990	$	1,375,131
Deferred stock-based compensation		15,745		22,041
Asset retirement obligation		150,950		153,358
Net operating loss		151,193		665,386
Other		35,345		11,642
	$	1,635,223	$	2,227,558
Deferred tax liabilities:
Excess financial accounting bases over tax bases of property and equipment		1,946,884		2,223,980
Deferred tax liability, net	$	311,661	$	3,578
Valuation allowance		-		(3,578	)
Net deferred tax	$	311,661	$	-

As of March 31, 2024, the Company has a statutory depletion carryforward of approximately $5,400,000, which does not expire. At March 31, 2024, the Company had a net operating loss carryforward for regular income tax reporting purposes of approximately $720,000, which will begin expiring in 2040. The Company’s ability to use some of its net operating loss carryforwards and certain other tax attributes to reduce current and future U.S. federal taxable income is subject to limitations under the Internal Revenue Code.

A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, we use estimates and judgment regarding our future taxable income, and we consider the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include our current financial position, our results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as the current and forecasted business economics of our industry.

A reconciliation of the provision for income taxes to income taxes computed using the federal statutory rate for years ended March 31 follows:

	2024			2023
Tax expense at federal statutory rate (1)	$	412,754		$	979,167
Statutory depletion carryforward		152,054			(257,509	)
Change in valuation allowance		(3,578	)		(749,912	)
U. S. tax reform, corporate rate reduction		-			-
Permanent differences		46,819			28,196
State income expense, net of federal benefit		94,507			164,510
Other		(82,012	)		58
Total income tax	$	620,544		$	164,510
Effective income tax rate		31.6	%		3.4	%

(1) The federal statutory rate was 21% for fiscal years ending March 31, 2024 and 2023.

For the years ended March 31, 2024 and 2023, the Company did not have any uncertain tax positions.

While the amount of unrecognized tax benefits may change in the next 12 months, the Company does not expect any change to have a significant impact on its results of operations. The recognition of the total amount of the unrecognized tax benefits would have an impact on the effective tax rate. If these unrecognized tax benefits are disallowed, the Company will be required to pay additional taxes.