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Note 6 - Income Taxes | 12 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 6. Income Taxes Components of income tax expense are as follows for the years ended:
|  | September 30, |  |  | September 30, |  |  | September 30, |
(In thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 385 |  |  | $ | 9,449 |  |  | $ | 13,230 |
State |  |  | (114 | ) |  |  | 1,435 |  |  |  | 1,532 |
Foreign |  |  | 4 |  |  |  | 144 |  |  |  | 48 |
Current income tax expense |  |  | 275 |  |  |  | 11,028 |  |  |  | 14,810 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (3,092 | ) |  |  | (1,751 | ) |  |  | (509 | )
State |  |  | (427 | ) |  |  | (251 | ) |  |  | 6 |
Foreign |  |  | (559 | ) |  |  | 53 |  |  |  | 165 |
Deferred income tax expense |  |  | (4,078 | ) |  |  | (1,949 | ) |  |  | (334 | )
Income tax expense |  | $ | (3,803 | ) |  | $ | 9,079 |  |  | $ | 14,472 |
The following is a reconciliation of the federal statutory income tax rate to the effective tax rate as a percent of pre-tax income for the following years ended:
|  | September 30, |  |  | September 30, |  |  | September 30, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State income taxes |  |  | 3.9 | % |  |  | 2.8 | % |  |  | 2.1 | %
Foreign income taxes |  |  | (1.5% | ) |  |  | (0.1% | ) |  |  | 0.4 | %
Permanent differences |  |  | 0.0 | % |  |  | 0.8 | % |  |  | 4.6 | %
Research and development credits |  |  | 0.8 | % |  |  | (1.0% | ) |  |  | (0.5% | )
Excess tax benefits from stock-based compensation |  |  | (0.8% | ) |  |  | (1.7% | ) |  |  | (4.9% | )
Effective Tax rate |  |  | 23.4 | % |  |  | 21.8 | % |  |  | 22.7 | %
As of September 30, 2024, the current U.S. income tax payable was approximately $30,000 and the foreign income tax receivable was approximately $5,000, these amounts are included in the other current assets and other current liabilities in the Company’s consolidated balance sheet. Current income tax payable amounts are included in accrued expenses in the Company’s consolidated balance sheets. As of September 30, 2024, and 2023, the Company had no U.S. federal or Estonian net operating loss (“NOL”) carryforwards. As of September 30, 2024, there is a state NOL of $64,000. There was no state NOL as of September 30, 2023. As of September 30, 2024, and 2023, there is a Finnish NOL of $1,851,000 and $1,000, respectively. The Company has not recorded a valuation allowance on these deferred tax assets as the Company believes it is more likely than not they will be utilized. In addition, as of September 30, 2024, and 2023, the Company had Minnesota research and development tax credits of $370,000 and $255,000, respectively. The Company has not recorded a valuation allowance on these research and development related deferred tax assets as the Company believes it is more likely than not they will be utilized before they begin to expire in fiscal year 2038. Significant components of deferred income tax assets and liabilities are as follows at:
|  | September 30, |  |  | September 30, |
(In thousands) |  | 2024 |  |  | 2023 |
Inventories |  | $ | 4,241 |  |  | $ | 2,154 |
R&D expenses |  |  | 1,328 |  |  |  | 832 |
Stock-based compensation |  |  | 1,042 |  |  |  | 600 |
Accrued expenses and reserves |  |  | 427 |  |  |  | 515 |
Property and equipment depreciation |  |  | 4 |  |  |  | (683 | )
Net operating loss carry forwards and credits |  |  | 726 |  |  |  | 201 |
Foreign currency translation loss |  |  | - |  |  |  | - |
Total deferred tax asset |  | $ | 7,768 |  |  | $ | 3,619 |
Goodwill |  |  | (1,146 | ) |  |  | (1,123 | )
Unrealized loss on investments |  |  | (16 | ) |  |  | 204 |
Prepaid expenses |  |  | (141 | ) |  |  | (193 | )
Intangibles |  |  | (254 | ) |  |  | (153 | )
Foreign currency translation gain |  |  | (238 | ) |  |  | (36 | )
Total deferred tax liability |  | $ | (1,795 | ) |  | $ | (1,301 | )
Net deferred tax asset |  | $ | 5,973 |  |  | $ | 2,318 |
Realization of NOL carryforwards and other deferred tax temporary differences are contingent upon future taxable earnings. The deferred tax assets and deferred tax liabilities are not netted due to being within different tax jurisdictions. The Company’s deferred tax assets were reviewed for expected utilization by assessing the available positive and negative factors surrounding their recoverability. As of September 30, 2024, and 2023, no valuation allowance was deemed necessary as the Company determined it was more likely than not that the Company’s deferred tax assets will be realized. The Company is required to recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applies the interpretation to all tax positions for which the statute of limitations remained open. The Company had no liability for unrecognized tax benefits and did not recognize any interest or penalties during the years ended September 30, 2024, or 2023. The Company is subject to income taxes in the U.S. federal and various state and foreign jurisdictions, including Finland. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Clearfield, Inc. is generally subject to U.S. federal examination for all tax years after 2019 and state examinations for all tax years after 2015 due to unexpired research and development credit carryforwards still open under statute. Nestor is generally subject to Finland examination for all tax years after 2020.

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