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Income Taxes | 12 Months Ended
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Jun. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax expense for the fiscal years ended June 30, 2018, 2017 and 2016 consists of the following (in thousands):
| Year ended June 30,
| 2018 |  | 2017 |  | 2016
Income Before Income Taxes: |  |  |  |  |
Domestic | $ | 8,234 |  |  | $ | 1,642 |  |  | $ | 7,518 |
International | 1,315 |  |  | 1,268 |  |  | 1,166 |
| $ | 9,549 |  |  | $ | 2,910 |  |  | $ | 8,684 |
Current Taxes: |  |  |  |  |
Federal | $ | 2,413 |  |  | $ | 1,324 |  |  | $ | 4,180 |
State | 407 |  |  | 137 |  |  | 561 |
Foreign | 150 |  |  | 510 |  |  | 455 |
Total Current Income Tax Provision | $ | 2,970 |  |  | $ | 1,971 |  |  | $ | 5,196 |
Deferred Taxes: |  |  |  |  |
Federal | $ | 377 |  |  | $ | (473 | ) |  | $ | (2,326 | )
State | 59 |  |  | (21 | ) |  | (105 | )
Foreign | 381 |  |  | (175 | ) |  | (187 | )
Total Deferred Income Tax Provision | $ | 817 |  |  | $ | (669 | ) |  | $ | (2,618 | )
Net Income Tax Provision | $ | 3,787 |  |  | $ | 1,302 |  |  | $ | 2,578 |
The effective income tax rate for the fiscal years ended June 30, 2018, 2017 and 2016 differs from the U.S. Federal statutory income tax rate due to the following:
| Year ended June 30,
| 2018 |  | 2017 |  | 2016
Federal statutory income tax rate | 28.0 | % |  | 34.0 | % |  | 35.0 | %
State income taxes, net of federal benefit | 2.5 | % |  | 5.9 | % |  | 2.8 | %
Foreign tax rate difference | 1.6 | % |  | (4.6 | )% |  | (2.3 | )%
Tax return to provision true-up | (7.4 | )% |  | 0.6 | % |  | 0.7 | %
Other differences | 0.2 | % |  | (2.1 | )% |  | 0.0 | %
Revalue of deferred for change in federal tax rate | 14.9 | % |  | 0.0 | % |  | 0.0 | %
Permanent differences: |  |  |  |  |
— stock based compensation | 0.7 | % |  | 4.6 | % |  | 0.9 | %
— domestic production activities deduction | (1.5 | )% |  | (3.3 | )% |  | (4.4 | )%
— tax credits | (1.3 | )% |  | (0.9 | )% |  | (0.7 | )%
— meals and entertainment | 0.9 | % |  | 3.4 | % |  | 1.0 | %
— penalties | 0.1 | % |  | 1.5 | % |  | 0.0 | %
— other | 0.9 | % |  | 4.3 | % |  | (3.9 | )%
Change in valuation allowance | 0.1 | % |  | 1.3 | % |  | 0.6 | %
Net income tax provision | 39.7 | % |  | 44.7 | % |  | 29.7 | %
The components of the deferred tax assets and liabilities as of June 30, 2018 and 2017 are as follows (in thousands):
| June 30,
| 2018 |  | 2017
Deferred tax assets: |  |  |
Federal, state, and foreign net operating loss carryovers | $ | 574 |  |  | $ | 536 |
Stock option compensation | 1,367 |  |  | 1,531 |
Accrued vacation, allowance for returns, bonuses & other | 2,615 |  |  | 3,173 |
Gross deferred tax asset | $ | 4,556 |  |  | $ | 5,240 |
Deferred tax liabilities: |  |  |
Patents and trademarks | $ | (145 | ) |  | $ | (253 | )
Property & equipment | (823 | ) |  | (588 | )
Other | (13 | ) |  | — |
Gross deferred tax liabilities | (981 | ) |  | (841 | )
Less: valuation allowance | (320 | ) |  | (312 | )
Deferred tax assets, net | $ | 3,255 |  |  | $ | 4,087 |
The Tax Cuts and Jobs Act of 2017 (the " 2017 Tax Act"), which became effective December 22, 2017, overhauls U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21% (blended rate in year one for fiscal year filers), implementing a territorial tax system, imposing a one time "deemed repatriation" tax on all untaxed offshore earnings, and adding/modifying/deleting several major tax deductions significant to the Company. In addition, the 2017 Tax Act also includes a provision to tax global intangible low-taxed income ("GILTI") of foreign subsidiaries and a base erosion anti-abuse tax ("BEAT") measure that taxes certain payments between a U.S. Corporation and its subsidiaries. The Company will not be subject to these provisions until its fiscal 2019 tax year. Preliminary analysis suggests that the Company will not have a GILTI liability and that it will not meet the threshold to be subject to BEAT nor does it currently make the types of payments that are subject to BEAT. The Company has done detailed analysis and computation to determine the impacts of the 2017 Tax Act to its financial statements. The Company has recorded the following items as part of its fiscal 2018 income tax provision (in thousands):
Revalue of Deferred Tax Assets for the Corporate Tax Rate Change | $ | 1,419 |
Deemed Repatriation Tax on All Untaxed Offshore Earnings | $ | — |
The Company was able to utilize its unborn foreign tax credits, mainly in Japan, to reduce its tax liability on its deemed repatriated earnings to zero. Any unused unborn foreign tax credits will be unavailable for future use. Deferred tax assets and liabilities measure the expected amounts that tax expense will increase or decrease by in the future due to temporary differences between book and tax basis. The Company has significant deferred tax assets, meaning we expect to receive a tax deduction in the future, mainly related to stock compensation and fixed assets. These tax assets were valued at a 35% federal rate. When the 2017 Tax Act was enacted, these deferred assets will now give rise to a tax deduction at a 21% rate. This means that the Company will receive less benefit in the future for its deferred tax assets. Therefore, it recognized a one-time tax expense of $1.4 million to reflect this revaluation. The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit. We believe the Company has no material uncertain tax positions and do not expect significant changes within the next twelve months in the amount of unrecognized tax benefits. Accordingly, we have not reserved for interest or penalties. The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2015 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2014 through present. In addition, the IRS and state tax authorities may examine NOL’s for any previous years if utilized by the Company. As of June 30, 2018, the Company had utilized all of its Federal net operating loss (“NOL”) carry-forwards. The net operating losses were to expire by June 30, 2024 and are subject to review by the Internal Revenue Service, and are subject to U.S. Internal Revenue Code Section 382 limitations. As of June 30, 2018, state NOLs were $8.2 million and foreign NOLs were $1.0 million. The total recognized tax benefit from settlement of stock based awards for the period ending June 30, 2018 was $0.5 million. The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2014 through June 30, 2018.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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