XML 49 R23.htm IDEA: XBRL DOCUMENT v3.25.2
INCOME TAXES
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 13 – INCOME TAXES

 

The provision for the Company’s income tax (expense) benefit is comprised of the following:

 

For the years ended June 30,  2025  2024
       
Federal          
Current tax benefit (expense)  $62,000   $(20,000)
Deferred tax (expense) benefit   (523,000)   206,000 
Federal income tax (expense) benefit, total   (461,000)   186,000 
           
State          
Current tax benefit (expense)   14,000    (100,000)
Deferred tax expense   (101,000)   (3,000)
State income tax (expense) benefit, total   (87,000)   (103,000)
           
Income tax (expense) benefit  $(548,000)  $83,000 

 

 

The provision for income taxes differs from the amount of income tax computed by applying the federal statutory income tax rate to income before taxes as a result of the following differences:

 

For the years ended June 30,  2025  2024
       
Statutory federal tax rate  $1,469,000   $2,644,000 
State income taxes, net of federal tax benefit   737,000    1,051,000 
Dividend received deduction   12,000    24,000 
Perm differences   (336,000)   (542,000)
Provision to return adjustment   105,000    (712,000)
Valuation allowance   (2,831,000)   (2,700,000)
Payable true up   182,000    320,000 
State rate change impact   95,000    33,000 
Other   19,000    (35,000)
Income tax expense (benefit)  $(548,000)  $83,000 

 

The components of the deferred tax asset and liabilities are as follows:

 

   June 30, 2025   June 30, 2024 
Deferred tax assets:          
Net operating loss carryforwards  $15,410,000   $14,512,000 
Deferred gains on real estate sale and depreciation   9,620,000    14,259,000 
Capital loss carryforwards   1,399,000    1,605,000 
Accruals and reserves   881,000    808,000 
Interest expense   6,385,000    5,157,000 
Tax credits   256,000    603,000 
State taxes   162,000    141,000 
Intercompany interest   2,243,000    - 
Other   -    110,000 
Deferred Tax Asset before Valuation Allowance   36,356,000    37,195,000 
Valuation Allowance   (39,314,000)   (36,484,000)
Deferred Tax Asset after Valuation Allowance   (2,958,000)   711,000 
Deferred tax liabilities:          
Deferred gains on real estate sale and depreciation   -    (4,654,000)
Unrealized gain on marketable securities   (30,000)   (291,000)
Intercompany interest   (1,887,000)   - 
Other   (473,000)   (490,000)
Deferred Tax Liability   (2,390,000)   (5,435,000)
Net deferred tax liability  $(5,348,000)  $(4,724,000)

 

Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2025, it has been determined that it is more likely than not that the deferred tax asset will not be recognized. Thus, there is a valuation allowance of $39,314,000 as of June 30, 2025. This was an increase of $2,830,000 from June 30, 2024.

 

As of June 30, 2025, the Company had net operating loss carryforwards (“NOL”) available for carryforward of approximately $44,375,000 and $73,782,000 for federal and state purposes, respectively. Of the $43,375,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $28,668,000 of post-2017 NOLs can be carried forward indefinitely. Note that the post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $4,913,000 for federal and state purposes. The capital losses begin to expire in 2025 for both federal and state purposes. There are immaterial California state tax credits of $257,000 which expire in various years.

 

As of June 30, 2024, the Company had net operating loss carryforwards (“NOL”) available for carryforward of approximately $43,396,000 and $63,131,000 for federal and state purposes, respectively. Of the $43,396,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $28,689,000 of post-2017 NOLs can be carried forward indefinitely. Note that the post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $6,814,000 for federal and state purposes. The capital losses begin to expire in 2024 for both federal and state purposes. There are immaterial California state tax credits of $603,000 which expire in various years.

 

Below is the breakdown of the net operating losses for Intergroup and Portsmouth.

  

   Federal   State 
InterGroup  $1,997,000   $4,405,000 
Portsmouth   41,378,000    69,377,000 
   $43,375,000   $73,782,000 

 

 

Utilization of certain tax attributes may be subject a substantial annual limitation if it should be determined that there has been a change in the ownership of more than 50 percent of the value of the Company’s stock, pursuant to Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examination by federal, state, and local jurisdictions, where applicable.

 

As of June 30, 2025, tax years beginning in fiscal 2021 and 2020 remain open to examination by the federal and state tax jurisdictions, respectively, and are subject to the statute of limitations.

 

Uncertain Tax Positions

 

The Company regularly evaluates the likelihood of realizing the benefit from income tax positions that it has taken in various federal, state, and foreign filings by considering all relevant facts, circumstances and information available. If the Company determines it is more likely than not that the position will be sustained, a benefit will be recognized at the largest amount that it believes is cumulatively greater than 50% likely to be realized. The following table summarizes changes in the amount of the Company’s unrecognized tax benefits for uncertain tax positions:

 

      
Unrecognized Tax Benefits at June 30, 2024  $1,665,000 
Increase in tax positions taken   - 
Decrease in tax positions taken   - 
Unrecognized Tax Benefits at June 30, 2025  $1,665,000 

 

As of June 30, 2025 and June 30, 2024, the Company had unrecognized tax benefits, which would affect the effective tax rate if recognized. The unrecognized tax benefit are not expected to reverse within the next 12 months. Interest and penalties related to income tax matters are classified as a component of income tax expense. As of June 30, 2025 and June 30, 2024, no interest and penalties were recorded.