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Note F - Income Taxes | 12 Months Ended
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Jun. 30, 2017
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | F . Income Taxes During fiscal 201 7, we recorded U.S.-based domestic tax expense of $2.2 million. During fiscal 2016, we recorded U.S.-based domestic tax expense of $3.6 million on U.S.-based income, which was offset by the release of our deferred tax asset valuation of $193,000 resulting in a net domestic tax expense of $3.4 million. The release of our deferred tax asset valuation was based on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets. The valuation allowance activity did not have any impact on the tax expense and related liability recorded for operating income recognized by NAIE during the years ended June 30, 2017 or June 30, 2016. The provision for income taxes for the years ended June 30 consisted of the following (in thousands):
|  | 201 7 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | 1,791 |  |  | $ | 3,339 |
State |  |  | 90 |  |  |  | 138 |
Foreign |  |  | 646 |  |  |  | 629 |
Total current |  |  | 2,527 |  |  |  | 4,106 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 305 |  |  |  | 46 |
State |  |  | 44 |  |  |  | 67 |
Valuation allowance |  |  | — |  |  |  | (193 | )
Total deferred |  |  | 349 |  |  |  | (80 | )
Total provision for income taxes |  | $ | 2,876 |  |  | $ | 4,026 |
Net deferred tax assets and deferred tax liabilities as of June 30 were as follows (in thousands):
|  | 201 7 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Inventory capitalization |  | $ | 438 |  |  | $ | 576 |
Inventory reserves |  |  | 178 |  |  |  | 103 |
Pension liability |  |  | 241 |  |  |  | 403 |
Accrued bonus |  |  | 114 |  |  |  | 391 |
Net operating loss carry forward |  |  | 240 |  |  |  | 298 |
Deferred rent |  |  | 193 |  |  |  | 175 |
Accumulated depreciation and amortization |  |  | 8 |  |  |  | 158 |
Stock-based compensation |  |  | 195 |  |  |  | 154 |
Tax credit carry forward |  |  | 176 |  |  |  | 138 |
Accrued vacation expense |  |  | 111 |  |  |  | 130 |
Other, net |  |  | 256 |  |  |  | 15 |
Total gross deferred tax assets |  |  | 2,150 |  |  |  | 2,541 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid expenses |  |  | (148 | ) |  |  | (260 | )
Other, net |  |  | — |  |  |  | (54 | )
Deferred tax liabilities |  |  | (148 | ) |  |  | (314 | )
Valuation allowance |  |  | — |  |  |  | — |
Net deferred tax assets |  | $ | 2,002 |  |  | $ | 2,227 |
At June 30, 2017, we had state tax net operating loss carry forwards of approximately $4.1 million. Under California tax law, net operating loss deductions were suspended for tax years beginning in 2008 , 2009, 2010 and 2011 and the carry forward periods of any net operating losses not utilized due to such suspension were extended. Our state tax loss carry forwards will begin to expire in fiscal 2032, unless used before their expiration. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the annual use of the net operating loss carry forwards and research and development tax credits could be limited by any greater than 50% ownership change during any three -year testing period. We did not have any ownership changes that met this criterion during the fiscal years ended June 30, 2017 and June 30, 2016. We are subject to taxation in the U.S., Switzerland and various state jurisdictions. Our tax years for the fiscal year ended June 30, 2014 and forward are subject to examination by the U.S. tax authorities and our years for the fiscal year ended June 30, 2007 and forward are subject to examination by the state tax authorities. Our tax years for the fiscal year ended June 30, 2015 and forward are subject to examination by the Switzerland tax authorities. NAIE ’s effective tax rate for Swiss federal, cantonal and communal taxes is approximately 17.5%. NAIE had net income of $3.1 million for the fiscal year ended June 30, 2017. Undistributed earnings of NAIE amounted to approximately $20.9 million at June 30, 2017. These earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal taxes has been provided thereon. A reconciliation of income tax provision computed by applying the statutory federal income tax rate of 34% to net income before income taxes for the year ended June 30 is as follows (dollars in thousands):
|  | 2017 |  |  | 2016 |
Income taxes computed at statutory federal income tax rate |  | $ | 3,438 |  |  | $ | 4,614 |
State income taxes, net of federal income tax expense |  |  | 95 |  |  |  | 179 |
Expenses not deductible for tax purposes |  |  | 29 |  |  |  | 19 |
Foreign tax rate differential |  |  | (613 | ) |  |  | (514 | )
Adjust state deferred due to change in apportionment |  |  | 6 |  |  |  | (18 | )
Change in valuation allowance |  |  | — |  |  |  | (193 | )
Other, net |  |  | (79 | ) |  |  | (61 | )
Income tax provision as reported |  | $ | 2,876 |  |  | $ | 4,026 |
Effective tax rate |  |  | 28.4 | % |  |  | 29.7 | %

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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