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Income Taxes
 12 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s effective income tax rate for the years ended June 30, 2023 and 2022 was 14.3% and (10.0%), respectively, which differed from the amount computed by applying the applicable U.S. federal statutory corporate income tax rate of 21% in each period as a result of the following factors:
Year ended June 30,
20232022
in thousands
Statutory rate$(10,667)$(1,520)
IRC Section 162(m) limitation (a)588 506 
Change in valuation allowance4,297 2,738 
Permanent adjustments457 662 
Prior year true-up and other157 389 
Income from entities not subject to taxation605 302 
State tax(2,678)(2,354)
Provision for income taxes$(7,241)$723 
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(a)Reflects the permanent addback for the Section 162(m) limitation, which limits the deduction of compensation for the five highest paid officers to $1,000,000.
Provision for income taxes consisted of the following for the years ended June 30, 2023 and 2022:
Year ended June 30,
20232022
in thousands
Current:
Federal$3,709 $(998)
State575 (339)
Total current tax expense4,284 (1,337)
Deferred:
Federal(10,263)1,408 
State(1,262)652 
Total deferred tax expense(11,525)2,060 
Total provision for income taxes$(7,241)$723 
The significant components of deferred tax assets and liabilities were as follows for the years ended June 30, 2023 and 2022:
Year ended June 30,
20232022
in thousands
Deferred tax assets:
Amortization$629 $686 
Federal net operating losses17,147 3,083 
State net operating losses5,701 4,048 
Provision for uncollectible accounts1,114 869 
Accrued vacation835 828 
Reported and estimated claims1,164 1,025 
Stock-based compensation449 185 
Accrued bonuses582 102 
Interest Expense791 496 
Lease liability6,784 — 
Other— 6 
Total deferred tax assets35,196 11,328 
Valuation allowance(8,347)(4,050)
Deferred tax assets, net of valuation allowance26,849 7,278 
Deferred tax liabilities:
Goodwill(6,697)(9,108)
Depreciation(13,137)(8,430)
Equity investment(5,019)(5,429)
Prepaid expenses(1,792)(2,072)
ROU asset(6,436)— 
Other(4)— 
Total deferred tax liabilities(33,085)(25,039)
Net deferred tax liability$(6,236)$(17,761)
Carryforwards
The Company had state net operating loss carryforwards of $117.9 million and $73.1 million at June 30, 2023 and 2022, respectively, which will begin to expire in 2037 if not utilized. Included in this is a city net operating loss which will begin to expire in 2025 if not utilized. Additionally, the Company has federal net operating loss carryforwards of $81.7 million and $14.7 million as of June 30, 2023 and 2022, respectively which do not expire.
Valuation Allowance
The Company has provided $8.3 million and $4.1 million at June 30, 2023 and June 30, 2022, respectively, as a valuation allowance against its deferred tax assets for federal and state net operating losses and state 163(j) interest expense limitations where there is not sufficient positive evidence to substantiate that these deferred tax assets will be realized at a more-likely-than-not level of assurance.
Other
The Company had no uncertain tax positions at June 30, 2023 and 2022.
The Company files income tax returns as a consolidated group, excluding SH1 and InnovAge Sacramento, in the U.S. federal jurisdiction and various states and is subject to examination by taxing authorities in all of those jurisdictions. From time to time, the Company’s tax returns are reviewed or audited by U.S. federal and various U.S. state-taxing authorities.
The Company believes that adjustments, if any, resulting from these reviews or audits would not be material, individually or in the aggregate, to the Company’s consolidated financial position, results of operations, or liquidity. The Company is subject to income tax examinations by U.S. federal and state jurisdictions for the period ended June 30, 2020 and forward. The Company is subject to income tax examinations by California, Colorado and New Mexico state jurisdictions for the period ended June 30, 2019 and forward.