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Note 13 - Income Taxes
 12 Months Ended
Jun. 30, 2024
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)

 

2024

  

2023

 

United States

 $1,670  $4,114 

Canada

  245   (31)

Total

 $1,915  $4,083 

 

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)

 

2024

  

Pretax

  

2023

  

Pretax

 

Tax expense at statutory rate

 $402   21.0% $857   21.0%

State and local income taxes, net of federal tax benefit

  117   6.1%  131   3.2%

Income from controlled foreign corporation

  56   2.9%  7   0.2%

Other

  7   0.4%  (61)  (1.5)%

Total tax expense

 $582   30.4% $934   22.9%

 

 

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

  

Year ended June 30,

 

(dollars in thousands)

 

2024

  

2023

 

Current tax expense (benefit) - U.S.

 $48  $1,245 

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

  117   131 

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

  82   (2)

Deferred tax expense (benefit) - U.S.

  329   (442)

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

  6   2 

Total tax expense (benefit)

 $582  $934 

 

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

 

  

June 30,

 

(dollars in thousands)

 

2024

  

2023

 

Deferred Income Tax Assets:

        

Accumulated depreciation

 $126  $117 

Investments in securities at fair value

  857   1,604 

Accrued expenses

  66   218 

Product start-up costs

  103   99 

Share-based compensation expense

  162   162 

Other

  67   40 

Net operating loss carryover

  -   24 

Capital loss carryover

  786   - 

Subtotal Deferred Tax Assets

  2,167   2,264 

Valuation Allowance

  -   (24)

Total Deferred Tax Assets

  2,167   2,240 

Deferred Income Tax Liabilities:

        

Investments in securities at fair value

 $-  $(4)

Prepaid expenses

  (82)  (77)

Foreign tax on undistributed earnings

  (252)  (243)

Total Deferred Tax Liabilities

  (334)  (324)

Net Deferred Tax Asset

 $1,833  $1,916 

 

Carryovers

 

For U.S. federal income tax purposes at June 30, 2024, the Company has no U.S. federal net operating loss carryovers and $3.7 million capital loss carryovers expiring in fiscal year 2029. For Canadian income tax purposes, USCAN has no net operating loss carryovers 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. There was no valuation allowance included at June 30, 2024. At June 30, 2023 a valuation allowance of $24,000 was included to fully reserve for net operating loss carryovers.

 

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, 2024, and June 30, 2023, the total reserve for uncertain tax positions, including interest and penalties, and net of federal benefits, was $785,000 and $671,000, respectively, which is included within long-term liabilities on the Consolidated Balance Sheets.

 

The reserve as of June 30, 2024, 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 $785,000 as of June 30, 2024, adequately covers open tax years and uncertain tax positions up to and including fiscal 2024 for major taxing jurisdictions. As of June 30, 2024, the entire $785,000 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)

 

2024

  

2023

 

Beginning Balance

 $671  $554 

Increases related to current year tax positions

  114   117 

Ending Balance

 $785  $671 

 

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 $277,000 and $250,000 as of June 30, 2024, and June 30, 2023, respectively. The tax years from 2021 through 2023 remain open to examination by the U.S. Federal tax jurisdictions to which the Company is subject. The tax years from 2017 through 2023 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.