INCOME TAXES

12 Months Ended

Mar. 26, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 4 – INCOME TAXES

Transcat’s income before income taxes on the Consolidated Statements of Income is as follows (amounts in thousands):

	FY 2022		FY 2021
United States	$	10,417	$	9,187
Foreign		2,773		795
Total	$	13,190	$	9,982

The provision for income taxes for fiscal years 2022 and 2021 is as follows:

	FY 2022			FY 2021
Current Tax Provision:
Federal	$	414		$	1,449
State		240			428
Foreign		752			103
	$	1,406		$	1,980
Deferred Tax (Benefit) Provision:
Federal	$	456		$	96
State		(10	)		(22	)
Foreign		(42	)		137
	$	404		$	211
Provision for Income Taxes	$	1,810		$	2,191

A reconciliation of the income tax provision computed by applying the statutory U.S. federal income tax rate and the income tax provision reflected in the Consolidated Statements of Income is as follows (amounts in thousands):

	FY 2022			FY 2021
Federal Income Tax at Statutory Rate	$	2,770		$	2,096
State Income Taxes, net of federal benefit		172			282
Foreign Taxes and Federal, State and Foreign Tax Credits		(127	)		9
Tax Impact of Equity Awards		(1,395	)		(274	)
Non-Deductible Acquisition Costs		206			-
GILTI and 78 Gross Up		161			-
Other, net		23			78
Total	$	1,810		$	2,191

	March 26, 2022			March 27, 2021
Deferred Tax Assets:
Accrued Liabilities	$	384		$	354
Lease Liabilities		2,622			2,439
Performance-Based Stock Award Grants		443			439
Inventory Reserves		100			132
Non-Qualified Deferred Compensation Plan		92			104
Post-Retirement Health Care Plans		333			506
Stock-Based Compensation		225			95
Deferred Payroll Tax – CARES Act		-			259
Capitalized Inventory Costs		158			118
Other		233			267
Total Deferred Tax Assets	$	4,590		$	4,713
Deferred Tax Liabilities:
Goodwill and Intangible Assets	$	(3,812	)	$	(1,233	)
Right of Use Assets		(2,623	)		(2,408	)
Depreciation		(4,767	)		(4,230	)
Other		(112	)		(43	)
Total Deferred Tax Liabilities	$	(11,314	)	$	(7,914	)
Net Deferred Tax Liabilities	$	(6,724	)	$	(3,201	)

The Company files income tax returns in the U.S. federal jurisdiction, various states, Canada and Ireland. The Company is no longer subject to examination by U.S. federal income tax authorities for fiscal years 2018 and prior, by state tax authorities for fiscal years 2016 and prior, by Canadian tax authorities for fiscal years 2016 and prior, and by Ireland tax authorities for calendar years 2017 and prior. There are no income tax years currently under examination by the Internal Revenue Service, Canadian and Irish tax authorities. One U.S. state has selected Transcat for analysis, the results of this analysis will determine if further action is required. The Nexa and Tangent acquisitions completed in fiscal year 2022 increased the net deferred tax liability by $3.0 million.

During fiscal years 2022 and 2021, there were no uncertain tax positions. No interest or penalties related to uncertain tax positions were recognized in fiscal years 2022 and 2021 or were accrued at March 26, 2022 and March 27, 2021.

The Company’s effective tax rate for fiscal years 2022 and 2021 was 13.7% and 21.9%, respectively. The tax rate is affected by recurring items, such as state income taxes and tax credits, which the Company expects to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. The discrete benefits related to share-based compensation awards in each of fiscal years 2022 and 2021 were $1.4 and $0.3 million, respectively.

The Company expects to receive certain federal, state and Canadian tax credits in future years. The Company also expects to receive discrete tax benefits related to share-based compensation awards in fiscal year 2023. As such, it expects its effective tax rate in fiscal year 2023 to be between 22.0% and 24.0%.