Note 10—Income Taxes

We file a consolidated federal income tax return in the United States and various combined and separate filings in several state and local jurisdictions.

There were no unrecognized tax benefits nor any accrued interest or penalties associated with unrecognized tax benefits during the year ended June 30, 2013, 2012 and 2011. We believe that we have appropriate support for the income tax positions taken and to be taken on the Company's tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. The Company's tax returns are open to audit under the statute of limitations for the years ending June 30, 2009 through June 30, 2012 for federal tax purposes and for the years ended June 30, 2009 through June 30, 2012 for state tax purposes.

The components of our income tax provision (benefit) are as follows:

	June 30, 2013			June 30, 2012		June 30, 2011

Current:
Federal	$	857,480		$	309,632	$	(64,068	)
State		659,303			841,698		132,596

Total current income tax provision		1,516,783			1,151,330		68,528

Deferred:
Federal		2,546,495			2,542,662		360,174
State		(33,517	)		6,930		20,212

Total deferred income tax provision		2,512,978			2,549,592		380,386

Total income tax provision	$	4,029,761		$	3,700,922	$	448,914

The 2013 effective rate is in excess of the federal statutory rate primarily due to Louisiana state income tax. The 2012 effective tax rate is in excess of the federal statutory rate primarily due to the incentive based stock compensation and Louisiana state income tax. The 2011 effective rate is well in excess of the federal statutory rate primarily due to the reversal of permanent deductions take in prior years that were recomputed as a result of the federal NOL carryback claims as well as incentive based stock compensation. The rate appears abnormally high as a result of the fixed dollar nature of the permanent items in relation to the nearly breakeven pretax book income. The following is a reconciliation of statutory income tax expense to our income tax provision:

	June 30, 2013			June 30, 2012			June 30, 2011

Income tax provision (benefit) computed at the statutory federal rate:	$	3,623,784		$	3,003,238		$	70,503
Reconciling items:
State income taxes, net of federal tax benefit		413,019			560,095			100,853
Stock-based compensation (primarily incentive stock options)		8,933			83,115			140,620
Expiring NOLs related to 2004 reverse merger		600,964			4,348,495
Deferred tax asset valuation adjustment		(600,964	)		(4,348,495	)		—
Reversal of Section 199 deductions as a result of carry-backs		—			—			141,920
Rate adjustment		—			—			(7,172	)
Other		(15,975	)		54,474			2,190

Income tax provision	$	4,029,761		$	3,700,922		$	448,914

Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are classified as either current or noncurrent on the balance sheet based on the classification of the related asset or liability for financial reporting purposes. Deferred tax assets and liabilities not related to specific assets or liabilities on the financial statements are classified according the expected reversal date of the temporary difference or the expected utilization date for tax attribute carryforwards. The change in the NOL is primarily due to expiring NOLs related to the 2004 reverse merger as well as utilization of NOL to offset potential current year taxable income. The components of our deferred taxes are detailed in the table below:

	June 30, 2013			June 30, 2012			June 30, 2011

Deferred tax assets:
Non-qualified stock-based compensation	$	774,673		$	774,720		$	959,547
Net operating loss carry-forwards		427,249			1,336,769			5,910,275
AMT credit carry-forward*		502,466			714,571			682,456
Other		28,170			29,929			23,626

Gross deferred tax assets		1,732,558			2,855,989			7,575,904
Valuation allowance		(292,446	)		(893,410	)		(5,187,983	)

Total deferred tax assets		1,440,112			1,962,579			2,387,921

Deferred tax liability:
Oil and natural gas properties		(9,832,948	)		(7,842,437	)		(5,718,187	)

Total deferred tax liability		(9,832,948	)		(7,842,437	)		(5,718,187	)

Net deferred tax liability	$	(8,392,836	)	$	(5,879,858	)	$	(3,330,266	)

*: Total AMT credit carry-forward is $632,335. Our net deferred tax liability does not include $129,869 of AMT credit carry-forward associated with the windfall tax benefit.

At June 30, 2013, we have a federal tax loss carry-forward of approximately $1.3 million. This amount is related to tax loss carry-forwards that we acquired through the reverse merger in May 2004, of which, approximately $0.4 million is available to us to use in equal amounts through 2023. We have applied a valuation allowance against the portion of the federal tax loss carry-forward that has been disallowed through IRC Section 382.