|12 Months Ended|
Mar. 31, 2017
8. Income Taxes
Current income tax provision is the amount of income taxes reported or expected to be reported on our income tax return. The provision for current income taxes for the fiscal year ended March 31, 2017 was $19,000, which was related to state income and foreign taxes. The Company did not have current federal income taxes for the fiscal year ended March 31, 2017.
Actual income tax expense differed from the amount computed by applying statutory corporate income tax rates to loss from operations before income taxes. A reconciliation of income tax (benefit) expense to the federal statutory rate follows (in thousands):
The Company’s deferred tax assets and liabilities consisted of the following at March 31, 2017 and 2016 (in thousands):
Because of the uncertainty surrounding the timing of realizing the benefits of favorable tax attributes in future income tax returns, the Company has placed a valuation allowance against its net deferred income tax assets. The change in valuation allowance for fiscal years ended March 31, 2017 and 2016 was $17.0 million and $5.6 million, respectively. The $17.0 million change in valuation allowance for fiscal year ended March 31, 2017 includes a current year income tax expense of $5.9 million and recognition of previously unrecognized excess tax benefits of $11.2 million as a result of the Company’s adoption of ASU 2016-09.
The Company’s NOL and tax credit carryforwards for federal and state income tax purposes at March 31, 2017 were as follows (in thousands):
The NOLs and federal and state tax credits can be carried forward to offset future taxable income, if any. Utilization of the NOLs and tax credits are subject to an annual limitation of approximately $57.3 million due to the ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The federal tax credit carryforward is a research and development credit, which may be carried forward. The state tax credits consist of a research and development credit can be carried forward indefinitely.
Accounting Standards Codification (“ASC”) 740, Income Taxes clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Based on management’s evaluation, the total amount of unrecognized tax benefits related to research and development credits as of March 31, 2017 and 2016 was $2.8 million and $2.7 million, respectively. There were no interest or penalties related to unrecognized tax benefits as of March 31, 2017 or March 31, 2016. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of March 31, 2017 and March 31, 2016 was $2.8 million and $2.7 million, respectively. However, this impact would be offset by an equal increase in the deferred tax valuation allowance as the Company has recorded a full valuation allowance against its deferred tax assets because of uncertainty as to future realization. The fully reserved recognized federal and state deferred tax assets related to research and development credits balance as of March 31, 2017 and 2016 was $10.2 million and $9.8 million, and $9.9 million and $9.5 million, respectively.
A reconciliation of the beginning and ending amount of total gross unrecognized tax benefits is as follows (in thousands):
The Company files income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for the years before 2012. However, net operating loss carryforwards remain subject to examination to the extent they are carried forward and impact a year that is open to examination by tax authorities. The Company’s evaluation was performed for the tax years which remain subject to examination by major tax jurisdictions as of March 31, 2017. When applicable, the Company accounts for interest and penalties generated by tax contingencies as interest and other expense, net in the statements of operations.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef