Motorcar Parts says FY18 results negatively impacted by 28c from tax reform
Motorcar Parts has evaluated its net income tax expense as a result of the December 2017 Tax Reform Act which reduces its federal corporate income tax rate to 21 percent from 35 percent, among other factors. The company estimates its effective tax rate commencing in fiscal 2019 will be reduced to approximately 25%. The company's deferred tax assets were reduced by a non-cash charge of approximately $4.9 million, as explained below. In addition, transition taxes of $530,000 were recorded as of March 31, 2018, as explained below. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted through income tax expense as changes in tax laws are enacted. Transition taxes are one-time expenses for deemed repatriation of accumulated foreign income. The company's fiscal 2018 results were negatively impacted by 28c per diluted share as a result of the Tax Reform Act. A prorated federal corporate income tax rate of 31.5% applies for the company's full 2018 fiscal year. The full impact of the Tax Reform Act will be effective in the fiscal year commencing April 1. These tax changes represent provisional amounts based on the company's interpretation of the Tax Reform Act and may change as the company receives additional clarification and implementation guidance. The company will continue to analyze the effects of the Tax Reform Act on the company's financial statements and operations. Any additional impacts from the enactment of the Tax Reform Act will be recorded as they are identified during the measurement period as provided for in accordance with Staff Accounting Bulletin No. 118.