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Note 13 - Income Taxes
 12 Months Ended
Jun. 30, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 13. INCOME TAXES

 

The Company and its non-Canadian subsidiaries file a consolidated U.S. federal income tax return. USCAN files a separate tax return in Canada. The Company's components of income (loss) before tax by jurisdiction are as follows:

 

  

Year ended June 30,

 

(dollars in thousands)

 

2023

  

2022

 

United States

 $4,114  $5,493 

Canada

  (31)  (525)

Total

 $4,083  $4,968 

 

The reconciliation of income tax computed at U.S. federal statutory rates to income tax expense is as follows:

 

  

Year ended June 30,

 
      

% of

      

% of

 

(dollars in thousands)

 

2023

  

Pretax

  

2022

  

Pretax

 

Tax expense at statutory rate

 $857   21.0% $1,042   21.0%

State and local income taxes, net of federal tax benefit

  131   3.2%  406   8.2%

Tax expense (benefit) from change in foreign unrealized gain/loss

  6   0.1%  (281)  (5.7)%

Non-taxable investment income (loss)

  (33)  (0.8)%  294   5.9%

Income from controlled foreign corporation

  7   0.2%  307   6.2%

Rate difference on foreign deferred income (loss)

  18   0.4%  (262)  (5.3)%

Foreign tax credit

  -   0.0%  (153)  (3.1)%

Other

  (52)  (1.2)%  175   3.6%

Total tax expense

 $934   22.9% $1,528   30.8%

 

Components of total tax expense (benefit) are as follows:

  

Year ended June 30,

 

(dollars in thousands)

 

2023

  

2022

 

Current tax expense - U.S.

 $1,245  $3,859 

Current tax expense - State U.S.

  131   406 

Current tax expense (benefit) - Non-U.S.

  (2)  154 

Deferred tax benefit - U.S.

  (442)  (2,657)

Deferred tax expense (benefit) - Non-U.S.

  2   (234)

Total tax expense

 $934  $1,528 

 

Components of the Company’s deferred assets and liabilities are as follows:

 

  

June 30,

 

(dollars in thousands)

 

2023

  

2022

 

Deferred Income Tax Assets:

        

Accumulated depreciation

 $117  $102 

Investments in securities at fair value

  1,604   837 

Accrued expenses

  218   407 

Product start-up costs

  99   99 

Share-based compensation expense

  162   164 

Other

  40   16 

Net operating loss carryover

  24   - 

Subtotal Deferred Tax Assets

  2,264   1,625 

Valuation Allowance

  (24)  - 

Total Deferred Tax Assets

  2,240   1,625 

Deferred Income Tax Liabilities:

        

Investments in securities at fair value

 $(4) $- 

Prepaid expenses

  (77)  (64)

Other investments

  -   (430)

Foreign tax on undistributed earnings

  (243)  (259)

Total Deferred Tax Liabilities

  (324)  (753)

Net Deferred Tax Asset

 $1,916  $872 

 

Carryovers

 

For U.S. federal income tax purposes at June 30, 2023, the Company has no U.S. federal net operating loss carryovers and no capital loss carryovers. For Canadian income tax purposes, USCAN has $91,000 of net operating loss carryovers expiring in fiscal year 2043 and no capital loss carryovers.

 

Additional Disclosures

 

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. At June 30, 2023, a valuation allowance of $24,000 was included to fully reserve for net operating loss carryovers. There was no valuation allowance included at June 30, 2022.

 

Uncertain income tax positions

 

The Company is subject to U.S. federal income tax, state tax jurisdictions within the U.S., and taxes in Canada. The Company maintains a reserve for uncertain tax positions. As of June 30, 2023, and June 30, 2022, the total reserve for uncertain tax positions, including interest and penalties, and net of federal benefits, was $496,000 and $379,000, respectively, which is included within long-term liabilities on the Consolidated Balance Sheets.

 

The reserve as of June 30, 2023, relates to the Company’s uncertain tax positions for income tax matters. The Company believes the reserve for uncertain tax positions, including interest and penalties, and net of federal benefits, of $496,000 as of June 30, 2023, adequately covers open tax years and uncertain tax positions up to and including fiscal 2023 for major taxing jurisdictions. As of June 30, 2023, the entire $496,000 of unrecognized tax benefits, including interest and penalties and net of federal benefit, if recognized, would impact the Company’s effective income tax rate.

 

The Company's activity was as follows:

 

  

Year ended June 30,

 

(dollars in thousands)

 

2023

  

2022

 

Beginning Balance

 $379  $- 

Increases related to current year tax positions

  117   379 

Ending Balance

 $496  $379 

 

The Company continues to follow its policy of recognizing interest and penalties accrued on tax positions as a component of income taxes on the Consolidated Statements of Operations. The amount of accrued interest and penalties associated with the Company’s tax positions was $166,000 and $86,000 as of June 30, 2023, and June 30, 2022, respectively. The tax years from 2019 through 2022 remain open to examination by the U.S. Federal tax jurisdictions to which the Company is subject. The tax years from 2016 through 2022 remain open to examination by the non-U.S. Federal tax jurisdictions to which the Company is subject. For jurisdictions with unfiled tax returns, the statutes of limitations remain open indefinitely.