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Income Taxes
 3 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

 

7. Income Taxes

 

We utilize the liability method of accounting for income taxes. The following table presents our effective tax rates based upon our provision for income taxes for the periods shown:

        
   Three Months Ended September 30, 
   2025   2024 
Effective tax rate   3%    10% 

 

The difference between our effective tax rates in the periods presented above and the federal statutory rate is primarily due to (i) a tax benefit from our domestic losses being recorded with a full valuation allowance, (ii) our current estimates of pre-tax profitability for the full fiscal year and (iii) the effect of foreign earnings taxed at rates differing from the federal statutory rate.

 

We have a net deferred tax liability of $183,000 and $172,000 at September 30, 2025 and June 30, 2025, respectively. This balance represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred tax assets and is recorded in other non-current liabilities on the accompanying unaudited condensed consolidated balance sheets.

 

The realization of deferred tax assets is dependent upon the generation of future taxable income. As required by ASC Topic 740, we have evaluated the positive and negative evidence bearing upon our ability to realize our deferred tax assets. We have determined that it was more likely than not that Lantronix would not realize the deferred tax assets due to our cumulative losses and uncertainty of generating future taxable income and have therefore provided a full valuation allowance against our deferred tax assets as of September 30, 2025 and June 30, 2025.

 

New Tax Legislation

 

In July 2025, the U.S. government enacted comprehensive legislation commonly referred to as the One Big Beautiful Bill Act of 2025 (the “OBBB Act”). The OBBB Act, which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international). It includes reinstating the option to claim 100% accelerated deprecations deductions on qualified property and immediate expensing of domestic research and development costs. Income tax accounting guidance requires the effects of tax law changes to be recognized in the period of enactment. We have analyzed the impacts of the OBB Act to our current income tax position and have determined that it does not have material impact as we continue to project taxable losses and maintain a full valuation against the losses that would be generated by these favorable positions. We will continue to evaluate the potential future impact of the OBBB on our financial statements.