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INCOME TAXES

9 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

NOTE L – INCOME TAXES

The Company records income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities: (i) are recognized for the expected future tax consequences of events that have been recognized in the financial statements or tax returns; (ii) are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases; and (iii) are measured using enacted tax rates expected to apply in the years when those temporary differences are expected to be recovered or settled.

Where applicable, deferred tax assets are reduced by a valuation allowance for any portions determined not likely to be realized. The valuation allowance is assessed by management on a quarterly basis and adjusted, by a charge or credit to income tax expense, as changes in facts and circumstances warrant. In assessing whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, management considers projections of future taxable income, the projected periods in which current temporary differences will be deductible, the availability of carry forwards, feasible and permissible tax planning strategies and existing tax laws and regulations. The Company did not have a valuation allowance against its net deferred tax assets at June 30, 2019 or September 30, 2018.

A reconciliation of income tax between the amounts calculated based upon pre-tax income at the Company’s federal statutory rate and the amounts reflected in the consolidated statements of operations are as follows:

		For the Three Months								For the Nine Months
		Ended June 30,								Ended June 30,
		2019				2018				2019				2018
		(In thousands)

Income tax expense at the statutory federal tax rate
of 21% and 24% for the three and nine months ended
June 30, 2019 and 2018, respectively		$	191			$	213			$	573			$	565
State tax expense			118				61				355				161
Reduction of deferred tax asset from change in federal tax rate			—				—				—				306
Other			(8	)			15				(23	)			3
Income tax expense		$	301			$	289			$	905			$	1,035

On December 22, 2017, the Company revised its estimated annual effective rate to reflect a change in the United States federal corporate tax rate from 34% to 21%. The rate change was administratively effective to the beginning of our fiscal year resulting in the use of a statutory rate of 21% for the three and nine months ended June 30, 2019 and a blended rate of 24% for the three and nine months ended June 30, 2018. Included in the income tax expense for the nine months ended June 30, 2018 was a $306,000 expense for a reduction in the Company’s net deferred tax assets resulting from the impact of the Tax Cuts and Jobs Act.

On July 1, 2018, the State of New Jersey's Assembly signed into law a new bill, effective January 1, 2018, that imposed a temporary surtax on corporations earning New Jersey allocated income in excess of $1 million. The surtax was set at a rate of 2.5% for tax years beginning on or after January 1, 2018 through December 31, 2019, and at a rate of 1.5% for years beginning on or after January 1, 2020, through December 31, 2021. Accordingly, the Company is using an 11.5% State tax rate for the calculation of its State income tax expense the three and nine months ended June 30, 2019.

In addition, effective for periods on or after January 1, 2019, the State of New Jersey is adopting mandatory unitary combined reporting for its Corporation Business Tax. The change is not expected to have a material impact on the Company’s State income tax.