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Income Taxes
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 6 – INCOME TAXES
The provision for income tax expense consisted of the following:
 
 
  
Year Ended September 30,
 
 
  
2024
 
  
2023
 
Current:
      
Federal
    $ 4,718,000    $ 4,151,000  
State
    335,000      279,000  
  
 
 
     
 
 
  
Total current
    5,053,000      4,430,000  
  
 
 
     
 
 
  
Deferred:
      
Federal
    609,000        (328,000 ) 
State
    510,000      8,000  
  
 
 
     
 
 
  
Total deferred
    1,119,000      (320,000 ) 
  
 
 
     
 
 
  
Income tax expense
    $ 6,172,000      $ 4,110,000  
  
 
 
     
 
 
  
A reconciliation of the federal statutory tax rate to the total tax provision is as follows:
 
 
  
Year Ended September 30,
 
 
  
2024
 
 
2023
 
Federal income taxes computed at the statutory rate
    21.0 %      21.0 % 
State income taxes, net of federal benefit
    1.2 %      1.4 % 
Unrecognized tax benefits
    5.8 %     — 
Other, net
    1.8 %      (0.5 %) 
  
 
 
    
 
 
  
Effective income tax rate
      29.8 %      21.9 % 
  
 
 
    
 
 
  
Deferred income tax assets and liabilities as of September 30, 2024 and 2023 consisted of the following:
 
 
  
September 30,
 
 
  
2024
 
  
2023
 
Deferred Tax Assets:
      
Accrued liabilities and reserves
    $ 494,000    $ 352,000  
Allowance for credit losses
    86,000      123,000  
Inventory
    4,700,000      3,901,000  
Unrealized loss on investments
    —       554,000  
Net operating losses carryforwards
      20,000        331,000  
  
 
 
     
 
 
  
Gross Deferred Income Tax Assets
    5,300,000      5,261,000  
  
 
 
     
 
 
  
Deferred and Other Tax Liabilities:
      
Unrealized gain on investments
    (233,000 )      —   
Property and equipment
    (1,643,000 )      (1,918,000 ) 
  
 
 
     
 
 
  
Gross Deferred and Other Income Tax Liabilities
    (1,876,000 )       (1,918,000 )
  
 
 
     
 
 
  
Net Deferred and Other Income Tax Assets
    $ 3,424,000      $ 3,343,000  
  
 
 
     
 
 
  
Total income taxes paid in fiscal 2024 and 2023 were $7,860,000 and $2,300,000, respectively.
GAAP prescribes a comprehensive model for the financial recognition, measurement, classification, and disclosure of
uncertain tax positions. GAAP contains a
two-step
approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, based on the technical merits of the position. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.
Significant judgment is required in evaluating the Company’s uncertain tax position and determining the Company’s provision for taxes. Although the Company believes the reserves of unrecognized tax benefits (“UTB’s”) are reasonable, no assurance can be given that the final outcome of these matters will not be different from that which is reflected in the Company’s historical income tax provision and accruals. The Company adjusts these reserves in light of changing facts and circumstances. As of September 30, 2024 and 2023, the Company had UTB’s of $
1,376,000 and $
176,000
, respectively. The Company accrued $1.2 million of UTB’s in the year ended September 30, 2024.
The Company accrued $45,000 of UTB’s in the year ended September 30, 2023.
A reconciliation of the beginning and ending amount of our unrecognized tax benefits for the year ended September 30, 2024 is as follows:
 
     2024  
Balance, beginning of year
    $ 176,000  
Additions based on tax positions related to the current year
      454,000  
Additions based on tax positions of prior years
      746,000  
  
 
 
  
Balance, end of year
    $ 1,376,000  
  
 
 
  
The Company recognizes interest and penalties accrued related to UTB’s as a component of income tax expense. There were
no
additional accruals of interest expense nor penalties of significance during fiscal years ended September 30, 2024 and 2023. It is reasonably possible that the amount of the UTB’s with respect to certain unrecognized tax positions will increase or decrease during the next 12 months. The Company does not expect the change to have a material effect on its results of operations or its financial position. The only expected potential reason for change would be the ultimate results stemming from any examinations by taxing authorities. If recognized, the entire amount of UTB’s would have an impact on the Company’s effective income tax rate.
The effective income tax rate for fiscal 2024 was 29.8% versus 21.9% in fiscal 2023.
There were no R&D Credits generated in fiscal 2024 or 2023 and there were no carryforwards of R&D Credits as of September 30, 2024 or September 30, 2023.
The Company files U.S. federal income tax returns, as well as income tax returns in multiple state jurisdictions. No income tax returns are currently under examination by taxing authorities. The Company’s U.S. federal income tax returns filed for tax years prior to fiscal year ended September 30, 2021 are generally no longer subject to examination by taxing authorities due to the expiration of the statute of limitations. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2020.