Income Taxes

12 Months Ended

Mar. 31, 2024

The components of current and deferred federal and state income tax provision are as follows:


	Year Ended March 31,
	2024		2023
	(In thousands)
Income (loss) before income taxes	$	3,463	$	(14,720)
Current income tax provision:
Federal	149		—
State	89		50
Total current tax provision	238		50
Deferred income tax provision:
Federal	20		34
State	74		51
Total deferred tax provision	94		85
Provision for income taxes	332		135
Income (loss), net of taxes	$	3,131	$	(14,855)

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


	Year Ended March 31,
	2024		2023
	(In thousands)
Provision for (benefit from) income taxes at statutory rates	$	727	$	(3,091)
State income taxes net of federal benefit	195		(423)
Tax credits	(981)		(434)
Compensation charges	612		156
Change in valuation allowance	(271)		3,849
Other	50		78
Provision for income taxes	$	332	$	135

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


	March 31,
	2024		2023
	(In thousands)
Deferred tax assets:
Net operating losses	$	2,317	$	5,962
Capitalized R&D	4,733		2,866
Credit carry-forwards	5,366		4,868
Deferred compensation and payroll	3,660		3,290
Bad debt allowance and other reserves	1,237		914
Property and equipment	860		729
Lease liabilities	2,203		—
Acquired intangibles	214		294
Other, net	547		518
Total deferred tax assets	21,137		19,441
Valuation allowance	(18,470)		(18,741)
Total deferred tax assets, net of valuation allowance	2,667		700
Deferred tax liabilities:
Goodwill	(1,294)		(1,122)
Right-of-use assets	(1,888)		—
Total deferred tax liabilities	(3,182)		(1,122)
Net deferred tax liabilities	$	(515)	$	(422)

At March 31, 2024, we had $4.2 million in federal research credits that begin to expire in 2031 and $1.3 million in state tax credits that began to expire in 2024. We had $7.9 million of federal net operating loss carryforwards at March 31, 2024 that do not expire as a result of recent tax law changes. We also had $10.0 million of state net operating loss carryforwards at March 31, 2024 that begin to expire in 2031.

In assessing the realizability of our deferred tax assets, we review 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. As the Company has sustained a cumulative pre-tax loss, we considered it appropriate to maintain valuation allowances of $18.5 million and $18.7 million against our deferred tax assets at March 31, 2024 and 2023, respectively. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

Unrecognized Tax Benefits

As of March 31, 2024 and 2023, our gross unrecognized tax benefits were approximately $1.5 million and $1.3 million, respectively, of which approximately $1.5 million and $1.2 million, respectively, are netted against certain noncurrent deferred tax assets. The amounts that would affect our effective tax rate if recognized are approximately $1.4 million and $1.2 million, respectively.

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


	Year Ended March 31,
	2024		2023
	(In thousands)
Gross unrecognized tax benefits at beginning of year	$	1,284	$	1,198
Increases for tax positions taken in prior years	81		22
Decreases for tax positions taken in prior years	(12)		(36)
Increases for tax positions taken in the current year	196		116
Lapse in statute of limitations	(27)		(16)
Gross unrecognized tax benefits	$	1,522	$	1,284

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 state tax jurisdictions. We are subject to U.S. federal tax examination for fiscal tax years ended March 31, 2021 or later, and state and local income tax examination for fiscal tax years ended March 31, 2020 or later. However, if net operating loss carryforwards that originated in earlier tax years are utilized in the future, the amount of such NOLs from such earlier years remain subject to review by tax authorities.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

ITERIS, INC. 10-K