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NOTE 11 - INCOME TAXES | 12 Months Ended
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Jun. 30, 2020
Income Tax Disclosure [Abstract] |
NOTE 11 - INCOME TAXES | NOTE 11 - INCOME TAXES ASC topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a corporate tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC topic 740. The Company believes there are no uncertain tax positions in prior years tax filings and therefore it has not recorded a liability for unrecognized tax benefits. In accordance with ASC topic 740, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as “Interest expense, net. Penalties if incurred would be recognized as a component of “Selling, general and administrative” expenses. The Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2016 for federal and 2015 for state. The Company has recorded a deferred tax asset of $18,809,757 and a deferred tax liability of $234,106 as of June 30, 2020, primarily relating to its net operating loss carryforwards of approximately $54,883,000 available to offset future taxable income through 2030. The net operating losses begin to expire in 2025 for federal tax and state income tax purposes. Future ownership changes as determined under Section 382 of the Internal Revenue code could further limit the utilization of net operating loss carryforwards. As of June 30, 2020, no such changes in ownership have occurred. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which temporary differences become deductible or when such net operating losses can be utilized. The Company considers projected future taxable income, the regulatory environment of the industry, and tax planning strategies in making this assessment. At present, the Company believes that it is more likely than not that the benefits from certain deferred tax asset carryforwards, will not all be fully realized. In recognition of this inherent risk, a valuation allowance was established for the partial value of the deferred tax asset, which principally related to research and development tax credits. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of the remainder of the valuation. The valuation allowance for deferred tax assets increased during the year ended June 30, 2020, by approximately $195,000. The valuation allowance decreased by approximately $2,350,000 during the year ended June 30, 2019. On March 27, 2020 Congress enacted the CARES Act (Coronavirus Aid, Relief and Economic Security Act). The Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding prior and future operation losses, temporary changes to prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections to prior tax legislation for tax depreciation of certain qualified improvement property and enhanced recoverability of AMT tax credits. At the present time, the only impact of the CARES Act to the Company is allowing a full reimbursement of $1,342,370 of tax credits relating to the alternative minimum tax credits. The Company received the first half payment in June 2020. The balance of alternative minimum tax credits of $671,185 was received in July 2020. Previously, these credits were to be refunded over a 3 year period. As we continue to monitor tax implications of the CARES Act and other state and federal stimulus tax legislation, we may make adjustments to our estimates and record additional amounts for tax assets and liabilities. Components of the provision (benefit) for income taxes are as follows:
|  | Years Ended June 30
Current: |  | 2020 |  | 2019
Federal |  | $ | (187,255 | ) |  | $ | — |
State |  |  | 513,204 |  |  |  | 250,000 |
Subtotal |  |  | 325,949 |  |  |  | 250,000 |
Deferred: |  |  |  |  |  |  |  |
Federal deferred taxes |  |  | 1,953,349 |  |  |  | 1,685,299 |
State deferred taxes |  |  | 165,480 |  |  |  | 70,221 |
Subtotal |  |  | 2,118,829 |  |  |  | 1,755,520 |
|  | $ | 2,444,778 |  |  | $ | 2,005,520 |
A reconciliation of the federal statutory income tax rate to the Company's effective tax rate as reported is as follows:
|  | Years Ended June 30,
|  | 2020 |  | 2019
Taxes at federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | %
State and local income taxes (benefit), net of federal benefit |  |  | 4.0 | % |  |  | 4.0 | %
Non Controlling interest |  |  | (6.1 | )% |  |  | (5.8 | )%
Permanent differences |  |  | 0.2 | % |  |  | (3.5 | )%
Change in the valuation allowance |  |  | 0.3 | % |  |  | (2.6 | )%
Other |  |  | (2.1 | )% |  |  | (4.2 | )%
Effective income tax rate |  |  | 17.3 | % |  |  | 8.9 | %
As of June 30, 2020, the Company has net operating loss (“NOL”) carryforwards of approximately $54,883,000 that will be available to offset future taxable income. The utilization of certain of the NOLs is limited by separate return limitation year rules pursuant to Section 1502 of the Internal Revenue Code. The Company has, for federal income tax purposes, research and development tax credits and investments tax credits carryforwards aggregating $4,440,000. However, the realization of these credits may be limited as a result of expiring prior to their utilization. These credits can only be applied after all net operating losses have been used, which expire through 2030. As such, the Company has established a valuation reserve for anticipated unused credits of $4,437,000. In addition, for New York State income tax purposes, the Company has tax credit carryforwards aggregating approximately $208,000 which, are accounted for under the flow-through method. The Company is also under audit with New York State for income tax and does not expect any material adjustments. Significant components of the Company's deferred tax assets and liabilities at June 30, 2020 and 2019 are as follows:
|  | June 30,
|  | 2020 |  | 2019
Deferred tax assets: |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 3,946,801 |  |  | $ | 3,011,480 |
Non-deductible accruals |  |  | 693,833 |  |  |  | 861,345 |
Net operating carryforwards |  |  | 13,720,637 |  |  |  | 16,448,054 |
Tax credits |  |  | 4,647,217 |  |  |  | 4,601,801 |
Inventory |  |  | 69,940 |  |  |  | 65,081 |
Property and equipment and depreciation |  |  | 168,371 |  |  |  | 192,133 |
|  |  | 23,246,799 |  |  |  | 25,179,894 |
Valuation allowance |  |  | (4,437,042 | ) |  |  | (4,242,147 | )
Total deferred tax assets |  |  | 18,809,757 |  |  |  | 20,937,747 |
Intangibles |  |  | (234,106 | ) |  |  | (243,267 | )
Total deferred tax liabilities |  |  | (234,106 | ) |  |  | (243,267 | )
Net deferred tax asset |  | $ | 18,575,651 |  |  | $ | 20,694,480 |

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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