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Note I - Income Taxes
 3 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

I. Income Taxes

 

For the three months ended  September 30, 2025, we used the discrete effective tax rate method in accordance with Accounting Standards Codification ("ASC") 740-270-30-18 which allows for treatment of the interim year-to-date period as if it were the annual period when calculating estimated income tax expense or benefit. For the three months ended  September 30, 2024, we used an estimated annual effective tax rate, which is based on expected annual income (or loss), statutory tax rates and tax planning opportunities available in the various jurisdictions to which we are subject to determine our quarterly provision for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense.

 

During fiscal year 2025, we recorded a valuation allowance against net domestic deferred income tax assets of $4.8 million, representing the amount of our deferred income tax assets in excess of our domestic deferred income tax liabilities. During the three months ended September 30, 2025, we recorded a valuation allowance against domestic deferred income tax assets of $0.1 million, representing the amount of our domestic deferred income tax assets in excess of our domestic deferred income tax liabilities as of  September 30, 2025. We recorded the valuation allowance because management was unable to conclude, in light of the cumulative loss we have realized related to our U.S.-based operations in recent years, that realization of the net domestic deferred income tax asset was more likely than not. The valuation allowance recorded as of September 30, 2025, related to U.S.-based deferred tax assets attributed to the U.S-based loss before income taxes during the three months ended September 30, 2025.

 

As a result of the recognition of these domestic valuation adjustments, we have a $4.9 million net deferred tax asset offset by a valuation allowance of $4.9 million resulting in a net deferred tax asset of $0 as of September 30, 2025. This valuation allowance did not have any effect on the tax expense and related liability recorded for operating income recognized by NAIE during the three months ended September 30, 2025.

 

Our effective tax rate for the three months ended September 30, 2025 was -46.2%, and our effective tax rate for the three months ended  September 30, 2024 was 17.9%. Our effective tax rate for the three months ended  September 30, 2025 differs from the fiscal 2025 U.S. federal statutory rate of 21% primarily due to a valuation allowance on deferred tax assets and a foreign income tax rate differential. Our effective tax rate for the three months ended  September 30, 2024 differs from the fiscal 2024 U.S. federal statutory rate of 21% primarily due to Global Intangible Low-taxed Income, forecasted research and forecasted research and development tax credits.

 

On July 4, 2025, congress voted into law the One Big Beautiful Bill Act which restores the immediate expensing of domestic research and development expenses while making permanent the capitalization and amortization rules of research and development conducted abroad.