Income Taxes

We file a consolidated federal income tax return in the United States of America in addition to 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, 2020 and 2019. 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, 2016 through June 30, 2019 for federal tax purposes and for the years ended June 30, 2015 through June 30, 2019 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, 2020			June 30, 2019
Current:
Federal	$	(2,264,850	)	$	2,343,512
State	345,522			371,593
Total current income tax provision (benefit)	(1,919,328		)	2,715,105
Deferred:
Federal	(266,482		)	387,541
State	4,814			379,715
Total deferred income tax provision (benefit)	(261,668		)	767,256
Total income tax provision (benefit)	$	(2,180,996	)	$	3,482,361

For the years ended June 30, 2020 and 2019, respectively, we recognized income tax benefit of $(2.2) million and an income tax expense of $3.5 million reflecting corresponding effective tax rates of (58.1)% and 18.5%, respectively. During the current year we undertook a project to seek potential cash tax savings opportunities identifying available Enhanced Oil Recovery credits (“EOR credits”) related to our interests in the Delhi field. To take advantage of the EOR credits, we amended federal and state tax returns for the years ended June 30, 2017 and 2018 and incorporated the associated impacts into our 2019 tax returns. Principally as a result of the EOR credits, the Company recorded a net tax benefit of $2.8 million during the current year. Relative to the foregoing, the Company has a $3.2 million receivable for income tax refunds at June 30, 2020.

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. 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, 2020			% of Income Before Income Taxes		June 30, 2019			% of Income Before Income Taxes
Income tax provision (benefit) computed at the statutory federal rate:	$	788,776		21.0	%	$	3,960,480		21.0	%
Reconciling items:
Return to provision adjustments including returns amended for EOR credits	(2,823,527		)	(75.2	)%	—			—	%
Depletion in excess of tax basis	(412,215		)	(11.0	)%	(982,302		)	(5.1	)%
State income taxes, net of federal tax benefit	272,962			7.3	%	593,533			3.1	%
Permanent differences related to stock-based compensation and other	22,408			0.6	%	(73,671		)	(0.4	)%
Expiration of Section 382 tax loss carryforwards	—			—	%	127,410			0.7	%
Change in valuation allowance for Section 382 tax loss carryforwards	—			—	%	(127,410		)	(0.7	)%
Other	(29,400		)	(0.8	)%	(15,679		)	(0.1	)%
Income tax provision (benefit)	$	(2,180,996	)	(58.1	)%	$	3,482,361		18.5	%

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, 2020			June 30, 2019
Deferred tax assets:
Non-qualified stock-based compensation	$	234,559		$	159,090
Net operating loss carry-forwards	78,197			496,082
Derivative losses	401,382			—
Other	53,159			20,713
Gross deferred tax assets	767,297			675,885
Valuation allowance	(53,218		)	(53,218		)
Total deferred tax assets	714,079			622,667
Deferred tax liability:
Oil and natural gas properties	(11,775,102		)	(11,945,358		)
Total deferred tax liability	(11,775,102		)	(11,945,358		)
Net deferred tax liability	$	(11,061,023	)	$	(11,322,691	)

As of June 30, 2020, we had a federal tax loss carryforward of approximately $0.6 million that we acquired through a 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.