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 years ended June 30, 2019 and 2018. 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 federal and state income tax returns are open to audit under the statute of limitations for the years ended June 30, 2015 through June 30, 2018 for federal tax purposes and for the years ended June 30, 2016 through June 30, 2018 for state tax purposes. To the extent we utilize net operating losses generated in earlier years, such earlier years may also be subject to audit.

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



	June 30, 2019		June 30, 2018
Current:
Federal	$	2,343,512	$	1,186,649
State	371,593		652,238
Total current income tax provision	2,715,105		1,838,887
Deferred:
Federal	387,541		(5,498,890		)
State	379,715		228,034
Total deferred income tax provision (benefit)	767,256		(5,270,856		)
	$	3,482,361	$	(3,431,969	)

For the years ended June 30, 2019 and 2018, respectively, we recognized income tax expense of $3.5 million and an income tax benefit of $(3.4) million reflecting corresponding effective tax rates of 18.5% and (21.2)%. The fiscal 2018 benefit included a one-time $(6.1) million tax benefit, resulting from adjustments of our deferred income tax liabilities in fiscal 2018 due to the enactment of the Tax Cut and Jobs Act (the "Tax Act") during December of 2017. Our effective tax rate will typically differ from the statutory federal rate as a result of state income taxes, primarily in the State of Louisiana, and differences related to percentage depletion in excess of basis, stock-based compensation and other permanent differences. For the years ended June 30, 2019 and 2018, our respective statutory federal tax rates were 21% and 27.55%, as we used a blended rate in the prior fiscal year when the Tax Act was enacted. Depletion in excess of basis had less of an impact on our effective rate in the current year as we utilized all of our depletion carryover in fiscal 2018. The following table presents the reconciliation of our income taxes calculated at the statutory federal tax rate to the income tax provision (benefit) in our financial statements.



	June 30, 2019			% of Income Before Income Taxes		June 30, 2018			% of Income Before Income Taxes
Income tax provision (benefit) computed at the statutory federal rate:	$	3,960,480		21.0	%	$	4,459,940		27.6	%
Reconciling items:
Adjustment of deferred income liability for the Tax Act's lower statutory federal tax rate	—			—	%	(5,949,389		)	(36.8	)%
Change in valuation allowance due to enactment of the Tax Act	—			—	%	(111,818		)	(0.7	)%
Expiration of Section 382 tax loss carryforwards	127,410			0.70	%	—			—	%
Change in valuation allowance for Section 382 tax loss carryforwards	(127,410		)	(0.70	)%	—			—	%
Depletion in excess of tax basis	(982,302		)	(5.1	)%	(2,433,530		)	(14.9	)%
State income taxes, net of federal tax benefit	593,533			3.1	%	718,337			4.4	%
Permanent differences related to stock-based compensation	(73,671		)	(0.4	)%	(139,333		)	(0.9	)%
Other	(15,679		)	(0.1	)%	23,824			0.1	%
Income tax provision (benefit)	$	3,482,361		18.5	%	$	(3,431,969	)	(21.2	)%

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.



	Asset (Liability)
	June 30, 2019			June 30, 2018
Deferred tax assets:
Non-qualified stock-based compensation	$	159,090		$	144,956
Net operating loss carry-forwards	496,082			680,186
Other	20,713			24,207
Gross deferred tax assets	675,885			849,349
Valuation allowance	(53,218		)	(180,628		)
Total deferred tax assets	622,667			668,721
Deferred tax liability:
Oil and natural gas properties	(11,945,358		)	(11,224,156		)
Total deferred tax liability	(11,945,358		)	(11,224,156		)
Net deferred tax liability	$	(11,322,691	)	$	(10,555,435	)

As of June 30, 2019, we had a federal tax loss carryforward of approximately $0.6 million that we acquired through the reverse merger in May 2004. The majority of the tax loss carryforwards from the reverse merger expired without being utilized. We will be able to utilize a maximum of $0.2 million of these carryforwards in equal annual amounts of $39,648 through 2023 and the balance is not able to be utilized based on the provisions of IRC Section 382. We have recorded a valuation allowance for the portion of our net operating loss that is limited by IRC Section 382.