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INCOME TAXES | 12 Months Ended
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Jun. 30, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES |
| 5. | INCOME TAXES
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property (“QIP”). Under ASC 740, the effects of new legislation are recognized upon enactment. The provisions of the CARES Act did materially impact our business or our tax provision. The provision for income taxes consists of the following amounts (in thousands):
|  | Years Ended June 30, |
|  | 2021 |  |  | 2020 |
Current: |  |  |  |  |  |
Federal |  | $ | 1,040 |  |  | $ | 1,542 |
State |  |  | 340 |  |  |  | 270 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | (186 | ) |  |  | (243 | )
State |  |  | (18 | ) |  |  | 221 |
Income tax expense |  | $ | 1,176 |  |  | $ | 1,790 |
The effective income tax rate from income from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages).
|  | Years Ended June 30, |
|  | 2021 |  |  | 2020 |
|  | Amount |  |  | Percent Pretax Income |  |  | Amount |  |  | Percent Pretax Income |
Income before income taxes |  | $ | 5,626 |  |  |  | 100 | % |  | $ | 7,902 |  |  |  | 100 | %
Computed “expected” income tax expense on income before income taxes |  | $ | 1,181 |  |  |  | 21 | % |  | $ | 1,659 |  |  |  | 21 | %
State tax, net of federal benefit |  |  | 279 |  |  |  | 5 | % |  |  | 440 |  |  |  | 6 | %
Tax incentives |  |  | (169 | ) |  |  | (3 | %) |  |  | (85 | ) |  |  | (1 | %)
Change in valuation allowance |  |  | — |  |  |  | — |  |  |  | (227 | ) |  |  | (3 | %)
Stock based compensation |  |  | (93 | ) |  |  | (2 | %) |  |  | — |  |  |  | — |
Other |  |  | (22 | ) |  |  | — |  |  |  | 3 |  |  |  | — |
Income tax expense |  | $ | 1,176 |  |  |  | 21 | % |  | $ | 1,790 |  |  |  | 23 | %
Deferred income taxes reflect the net effects of loss and credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Federal and state NOL carryforward |  | $ | 20 |  |  | $ | 21 |
Research and other credits |  |  | 65 |  |  |  | 65 |
Reserves and accruals |  |  | 461 |  |  |  | 438 |
Stock based compensation |  |  | 268 |  |  |  | 110 |
Unrealized losses |  |  | 61 |  |  |  | 455 |
Inventory |  |  | 371 |  |  |  | 334 |
Total gross deferred tax assets |  | $ | 1,246 |  |  | $ | 1,423 |
Less: valuation allowance |  |  | (158 | ) |  |  | (543 | )
Total deferred tax assets |  |  | 1,088 |  |  |  | 880 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment, principally due to differing depreciation methods |  | $ | (523 | ) |  | $ | (577 | )
Deferred state tax |  |  | (38 | ) |  |  | (33 | )
Other |  |  | (64 | ) |  |  | (11 | )
Total gross deferred tax liabilities |  |  | (625 | ) |  |  | (621 | )
Net deferred tax assets |  | $ | 463 |  |  | $ | 259 |
Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. As of June 30, 2021, our deferred tax asset valuation allowance primarily consists of unrealized capital loss for investments held and the state net operating loss carryforwards for states in which we have filed a final return. For the fiscal year ended June 30, 2021, we recorded a net decrease to our valuation allowance of $385,000 on the basis of management’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized. As of June 30, 2021, we did not have any net operating losses for federal and state income tax purposes for state jurisdictions in which we currently operate. We have no federal or state research and development and alternative minimum tax credit carry forwards at June 30, 2021. As of June 30, 2021, we have accrued $550,000 of unrecognized tax benefits related to federal and state income tax matters that would reduce our income tax expense if recognized. If we are eventually able to recognize our uncertain tax positions, our effective tax rate would be reduced. Any adjustment to our uncertain tax positions would result in an adjustment of our tax credit carryforwards rather than resulting in a cash outlay. Information with respect to our accrual for unrecognized tax benefits is as follows (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |
Unrecognized tax benefits: |  |  |  |  |  |  |  |
Beginning balance |  | $ | 524 |  |  | $ | 490 |
Additions based on federal tax positions related to the current year |  |  | 30 |  |  |  | 15 |
Additions based on state tax positions related to the current year |  |  | 20 |  |  |  | 13 |
Additions for tax positions of prior years |  |  | 6 |  |  |  | 55 |
Reductions due to lapses in statutes of limitation |  |  | (30 | ) |  |  | (49 | )
Ending balance |  | $ | 550 |  |  | $ | 524 |
Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examinations, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, we do not anticipate any significant changes to unrecognized tax benefits over the next twelve months. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense when applicable. As of June 30, 2021, no interest or penalties applicable to our unrecognized tax benefits have been accrued since we have sufficient tax attributes available to fully offset any potential assessment of additional tax. We are subject to U.S. federal income tax, as well as income tax of California, Colorado, Maryland, and Massachusetts. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2018, and later. However, because of our prior net operating losses and research credit carryovers, substantially all of our tax years are open to audit.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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