WORLD ACCEPTANCE CORPWRLD
WORLD ACCEPTANCE CORP Income Taxes Disclosure
Income Taxes
The Company recognizes the investment of the HTC under the proportional amortization method which allows the investment to be recognized in proportion to the tax credit as a component of income tax expense. As of March 31, 2025 and 2024, investment in HTC was $15.9 million and $24.8 million, respectively, which is included as a component of Other assets, net and Accounts payable and accrued expenses in the Consolidated Balance Sheets. The Company recognized net amortization from these investments of $17.8 million and $8.8 million for the years ended March 31, 2025 and 2024, respectively, in income tax expense. The Company recognized tax benefits from these investments of $19.6 million and $9.7 million during the years ended March 31, 2025 and 2024, respectively, in income tax expense and in Income taxes payable in the Consolidated Statements of Cash Flows. The Company did not recognize any non-tax related activity or have any significant modifications to its investments during the current fiscal year.
Income tax expense (benefit) consists of:
| Current | Deferred | Total | |||||||||||||||
| Year ended March 31, 2025 | |||||||||||||||||
| Federal | $ | 21,453,743 | $ | (2,729,425) | $ | 18,724,318 | |||||||||||
| State and local | 3,138,466 | 381,195 | 3,519,661 | ||||||||||||||
| $ | 24,592,209 | $ | (2,348,230) | $ | 22,243,979 | ||||||||||||
| Year ended March 31, 2024 | |||||||||||||||||
| Federal | $ | 9,592,743 | $ | 8,325,695 | $ | 17,918,438 | |||||||||||
| State and local | 1,732,162 | 2,411,909 | 4,144,071 | ||||||||||||||
| $ | 11,324,905 | $ | 10,737,604 | $ | 22,062,509 | ||||||||||||
| Year ended March 31, 2023 | |||||||||||||||||
| Federal | $ | 7,135,030 | $ | (1,430,623) | $ | 5,704,407 | |||||||||||
| State and local | 880,838 | (671,462) | 209,376 | ||||||||||||||
| $ | 8,015,868 | $ | (2,102,085) | $ | 5,913,783 | ||||||||||||
The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported income tax expense for March 31, 2025, 2024 and 2023 are summarized as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected income tax | $ | 23,516,929 | $ | 20,875,624 | $ | 5,700,613 | |||||||||||
| Increase (reduction) in income taxes resulting from: | |||||||||||||||||
| State tax (excluding state tax credits), net of federal benefit | 3,034,552 | 3,513,226 | 328,026 | ||||||||||||||
| Federal tax credits, net | (1,922,712) | (1,034,091) | (200,203) | ||||||||||||||
| State tax credits | (254,020) | (239,410) | (162,619) | ||||||||||||||
| Uncertain tax positions | 26,631 | (16,802) | (1,151,234) | ||||||||||||||
| Expiration of capital loss carryforward | — | 7,773,559 | — | ||||||||||||||
| Executive compensation limitation under Section 162(m) | 364,892 | 62,686 | 732,504 | ||||||||||||||
Forfeiture of the $20.45 Performance Shares and partial forfeiture of the $16.35 Performance Shares | (2,587,552) | — | — | ||||||||||||||
| Excess tax benefits related to equity compensation | (182,098) | (347,806) | (73,644) | ||||||||||||||
| Decrease in valuation allowance related to capital loss carryforward | — | (7,773,559) | — | ||||||||||||||
| Prior year adjustments | (54,152) | (1,135,270) | 238,187 | ||||||||||||||
| Other, net | 301,509 | 384,352 | 502,153 | ||||||||||||||
| $ | 22,243,979 | $ | 22,062,509 | $ | 5,913,783 | ||||||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2025 and 2024 are presented below:
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 25,693,205 | $ | 25,538,524 | |||||||
| Unearned insurance commissions | 9,407,895 | 10,944,327 | |||||||||
| Accrued expenses primarily related to employee benefits | 6,181,990 | 10,234,369 | |||||||||
| Reserve for uncollectible interest | 993,241 | 990,192 | |||||||||
| Lease liability | 19,359,479 | 20,217,720 | |||||||||
| Intangible assets | 1,965,939 | 1,701,995 | |||||||||
| Foreign tax credit carryforward | 5,639,649 | 3,254,926 | |||||||||
| Capital loss carryforward | 192,767 | 192,767 | |||||||||
| State net operating loss carryforwards | 6,005,260 | 5,481,746 | |||||||||
| Gross deferred tax assets | 75,439,425 | 78,556,566 | |||||||||
| Less valuation allowance | (8,695,894) | (8,094,712) | |||||||||
| Net deferred tax assets | 66,743,531 | 70,461,854 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Fair value adjustment for loans receivable | (7,713,732) | (12,357,392) | |||||||||
| Property and equipment | (3,510,245) | (3,912,030) | |||||||||
| Deferred loan origination costs | (1,366,926) | (1,239,726) | |||||||||
| Prepaid expenses | (1,529,317) | (1,662,717) | |||||||||
| ROU assets | (18,750,736) | (19,619,875) | |||||||||
| Other | (581,501) | (727,270) | |||||||||
| Gross deferred tax liabilities | (33,452,457) | (39,519,010) | |||||||||
| Deferred income taxes, net | $ | 33,291,074 | $ | 30,942,844 | |||||||
At March 31, 2025, the Company had state net operating loss carryforwards of approximately $102.0 million. A deferred tax asset of approximately $6.0 million was recorded to reflect the benefit of these losses. Of this $6.0 million, $0.8 million is expected to be recognized. The state net operating loss carryforward will expire between 2031 and 2043.
The valuation allowance for deferred tax assets increased by $0.6 million for the year ended March 31, 2025 when compared to March 31, 2024. The valuation allowance at March 31, 2025 and 2024 was $8.7 million and $8.1 million, respectively. The valuation allowance against the total deferred tax assets as of March 31, 2025 consisted of $5.2 million from state net operating loss carryforwards in the amount of $83 million which expire from 2031 to 2043, a foreign tax credit carryforward of $3.3 million arising in relation to the Transition Tax during fiscal 2018 which expires in 2028, and $0.2 million related to the $0.9 million capital loss on the sale of the former headquarters buildings which expire from 2026 to 2027. The Company does not expect to generate enough foreign source income, state taxable income in the respective jurisdictions or capital gains in future tax years to realize these tax attributes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of the appropriate character prior to the expiration of the deferred tax assets governed by the tax code.
For each of the years ended March 31, 2025, 2024, and 2023, the Company had $1.1 million of total gross unrecognized tax benefits including interest. Of these totals, approximately $0.9 million, represents the amount of net unrecognized tax benefits that are permanent in nature and, if recognized, would affect the annual effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits at March 31, 2025, 2024, and 2023 are presented below:
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefit balance beginning of year | $ | 748,289 | $ | 818,225 | $ | 1,616,116 | |||||||||||
| Gross increases for tax positions of current year | 73,696 | 105,531 | 129,146 | ||||||||||||||
| Lapse of statute of limitations | (81,369) | (175,467) | (927,037) | ||||||||||||||
| Unrecognized tax benefit balance end of year | $ | 740,616 | $ | 748,289 | $ | 818,225 | |||||||||||
At March 31, 2025, approximately $0.4 million of gross unrecognized tax benefits are expected to be resolved during the next 12 months through settlements with taxing authorities or the expiration of the statute of limitations. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. For each of the years ended March 31, 2025, 2024, and 2023, the Company had $0.3 million accrued for gross interest, of which $0.1 million represented the current period expense for each of the years ended March 31, 2025, 2024, and 2023.
The Company is subject to U.S. income tax, as well as various other state and local jurisdictions. With the exception of a few states, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2020, although carryforward attributes that were generated prior to 2020 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | May 22, 2025 | Showing above |
| 2024 | May 23, 2024 | |
| 2023 | Jun 1, 2023 | |
| 2022 | May 27, 2022 | |
| 2021 | Jun 2, 2021 | |
| 2020 | May 29, 2020 | |
| 2019 | May 24, 2019 | |
| 2018 | Jun 13, 2018 | |
| 2017 | Jun 29, 2017 | |
| 2016 | Jun 1, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.