v3.26.3
Note 8 - Federal, State and Local Income Taxes
 3 Months Ended
Jul. 31, 2026
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 8 - Federal, State and Local Income Taxes:

 

In accordance with the requirements of the Income Tax Topic of the FASB's ASC, the Company's provision for income taxes includes the following:

 

   

Three Months Ended July 31,

  

($ in thousands)

  

2026

    

2025

  

Current tax expense:

                

Federal

   $ 1,108     $ 1,389  

State and local

     330       392  

Current tax expense

     1,438       1,781  

Deferred tax expense (benefit):

                

Federal

     92       385  

State and local

     192       10  

Deferred tax expense (benefit):

     284       395  

Income tax provision

   $ 1,722     $ 2,176  

 

On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act (the "Tax Act"), was enacted. The Tax Act lowered the U.S. federal income tax rate ("Federal Tax Rate") from 35% to 21% effective January 1, 2018.  Accordingly, the Company computes Federal income tax expense using the Federal Tax Rate of 21% in fiscal year 2019 and each year thereafter.  

 

The overall effective income tax rates, as a percentage of pre-tax ordinary income for the three months ended July 31, 2026 and July 30, 2025 were 27.00% and 25.20%, respectively. The increase in the effective tax rate during for the three months ended July 31, 2026 as compared to July 31, 2025, is primarily a result of an increase in the state and local tax rate from 4.39% to 6.40%, primarily in a single jurisdiction that has changed from a market based approach to a cost of production approach affecting EAM's allocation of taxable income for the combined companies to that jurisdiction. The Company's annualized overall effective tax rate fluctuates due to a number of factors, in addition to changes in tax law, including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-income tax, the Company's geographic profit mix between tax jurisdictions, taxation method adopted by each locality, changes in tax rates, new interpretations of existing tax laws and rulings and settlements with tax authorities.

 

Deferred income taxes, a liability, are provided for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. The tax effect of temporary differences giving rise to the Company's long-term deferred tax liability are as follows:

 

   

July 31,

    

April 30,

  

($ in thousands)

  

2026

    

2026

  

Federal tax liability (benefit):

                

Deferred gain on deconsolidation of EAM

   $ 10,669     $ 10,669  

Deferred non-cash post-employment compensation

     (372 )     (372 )

Depreciation and amortization

     46       50  

Unrealized gain/(loss) on securities held for sale

     1,914       1,777  

Right of Use Asset

     (64 )     (75 )

Deferred charges

     (126 )     (117 )

Other

     (712 )     (596 )

Total federal tax liability

     11,355       11,336  
                 

State and local tax liabilities (benefits):

                

Deferred gain on deconsolidation of EAM

     2,957       2,901  

Deferred non-cash post-employment compensation

     (103 )     (101 )

Depreciation and amortization

     (5 )     14  

Unrealized gain/(loss) on securities held for sale

     531       483  

Other

     (424 )     (533 )

Total state and local tax liabilities

     2,956       2,764  

Deferred tax liability, long-term

   $ 14,311     $ 14,100  

 

The tax effect of temporary differences giving rise to the Company's long-term deferred tax liability is primarily a result of the federal, state and local taxes related to the $50,805,000 gain from deconsolidation of the Company's asset management and mutual fund distribution subsidiaries, partially offset by the long-term tax benefit related to the non-cash post-employment compensation of $1,770,000 granted to VLI's former employee.

 

At the end of each interim reporting period, the Company estimates the effective income tax rate to apply for the full fiscal year. The Company uses the effective income tax rate determined to provide for income taxes on a year-to-date basis and reflects the tax effect of any tax law changes and certain other discrete events in the period in which they occur.

 

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate to pretax income as a result of the following:

 

   

Three Months Ended July 31,

  
   

2026

    

2025

  

($ in thousands, except percentages)

  

Amount

    

Percent

    

Amount

    

Percent

  

U.S. statutory federal tax

   $ 1,339       21.00 %   $ 1,813       21.00 %

Increase (decrease) in tax from:

                                

State and local income taxes, net of federal income tax benefit (1)

     408       6.40 %     380       4.39 %

Effect of dividends received deductions

     (25 )     (0.40 %)     (17 )     (0.19 )%

Effective income tax

   $ 1,722       27.00 %   $ 2,176       25.20 %

 

(1) In each year, no fewer than five states, in the aggregate, represented the majority of state income taxes.

 

The Company believes that, as of July 31, 2026, there were no material uncertain tax positions that would require disclosure under GAAP. 

 

The Company is included in the consolidated federal income tax return of the Parent. The Company has a tax sharing agreement which requires it to make tax payments to the Parent equal to the Company's liability/(benefit) as if it filed a separate return. Beginning with the fiscal year ended April 30, 2017, the Company files combined income tax returns with the Parent on a unitary basis in certain states as a result of changes in state tax regulations.

 

The Company’s federal income tax returns (included in the Parent’s consolidated returns) and state and city tax returns for fiscal years ended 2023 through 2025, are subject to examination by the tax authorities, generally for three years after they are filed with the tax authorities.