XML 39 R19.htm IDEA: XBRL DOCUMENT
v3.22.4

INCOME TAXES | 12 Months Ended
--- | ---
Sep. 30, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of earnings before income taxes, after adjusting the earnings for non-controlling interests, are as follows:
| Year ended September 30,
| 2022 |  | 2021
United States | $ | 739,000 |  |  | $ | 5,436,000 |
Canada | 5,121,000 |  |  | 1,149,000 |
| $ | 5,860,000 |  |  | $ | 6,585,000 |
The components of the income tax provision related to the above earnings are as follows:
| Year ended September 30,
| 2022 |  | 2021
Current provision: |  |  |
United States – Federal |  |  |
Before operating loss carryforwards | $ | 727,000 |  |  | $ | 60,000 |
Benefit of operating loss carryforwards | (665,000) |  |  | (60,000) |
After operating loss carryforwards | 62,000 |  |  | — |
United States – State |  |  |
Before operating loss carryforwards | 518,000 |  |  | 174,000 |
Benefit of operating loss carryforwards | (62,000) |  |  | (7,000) |
After operating loss carryforwards | 456,000 |  |  | 167,000 |
Canadian |  |  |
Before operating loss carryforwards | 510,000 |  |  | — |
Benefit of operating loss carryforwards | (510,000) |  |  | — |
After operating loss carryforwards | — |  |  | — |
Total current | 518,000 |  |  | 167,000 |
Deferred (benefit) provision: |  |  |
United States – State | (171,000) |  |  | 165,000 |
Canadian | — |  |  | — |
Total deferred | (171,000) |  |  | 165,000 |
| $ | 347,000 |  |  | $ | 332,000 |
Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that the Company is taxed separately in Canada based on Canadian source operations and in the U.S. based on consolidated operations, and essentially all deferred tax assets, net of relevant offsetting deferred tax liabilities, are not estimated to have a future benefit as tax credits or deductions. Income from our non-controlling interest in the Kukio Resort Land Development Partnerships is treated as non-unitary for state of Hawaii unitary filing purposes, thus unitary Hawaii losses provide limited sheltering of such non-unitary income. Income from our investment in the Oklahoma oil venture is 100% allocable to Oklahoma, and therefore, receives no benefit from consolidated or unitary losses and, therefore, is subject to Oklahoma state taxes. In addition, net operating loss carryforwards, all of which had a full valuation allowance at the end of the previous fiscal year, are being partially utilized in the current year to offset taxable income in the U.S. federal and Canadian jurisdictions. The net operating loss carryforwards beyond the current year’s utilization continue to have a full valuation allowance as realization of their benefit is not more likely than not. Included in the current income tax provision for the year ended September 30, 2022 is a $62,000 expense for income tax penalties and interest thereon for the non-filing of IRS Form 8858 in each of our U.S. federal income tax returns for fiscal years 2019, 2020 and 2021. The Company is in the process of amending its U.S. federal tax returns to include Form 8858 and plans to request abatement of the potential penalties and interest. There was no such expense included in the current income tax provision for the year ended September 30, 2021. On December 27, 2020, the President signed into law the Consolidated Appropriations Act (the “Act”), an omnibus spending bill to fund the federal government that also includes an array of COVID-related tax relief for individuals and businesses. The tax-related measures contained in the Act revise and expand provisions enacted earlier in the year by the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act. The Act also extends a number of expiring tax provisions. Additionally, the Act provides for a 100% deduction for certain business meals incurred in calendar years 2021 and 2022. The Company determined that income tax effects related to the passage of the Consolidated Appropriations Act were not material to the financial statements for the years ended September 30, 2021 and 2022. A reconciliation between the reported income tax expense and the amount computed by multiplying the earnings attributable to Barnwell before income taxes by the U.S. federal tax rate of 21% is as follows:
| Year ended September 30,
| 2022 |  | 2021
Tax provision computed by applying statutory rate | $ | 1,231,000 |  |  | $ | 1,383,000 |
Decrease in the valuation allowance | (1,450,000) |  |  | (1,427,000) |
Additional effect of the foreign tax provision on the total tax provision | 130,000 |  |  | 31,000 |
Uncertain tax positions | 62,000 |  |  | — |
U.S. state tax provision, net of federal benefit | 285,000 |  |  | 332,000 |
Other | 89,000 |  |  | 13,000 |
| $ | 347,000 |  |  | $ | 332,000 |
The changes in the valuation allowance shown in the table above exclude the impact of changes in state taxes and foreign tax credit expiries, the valuation allowance impacts of which are incorporated within the respective reconciliation line items elsewhere in the table. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
| September 30,
| 2022 |  | 2021
Deferred income tax assets: |  |  |
Foreign tax credit carryover under U.S. tax law | $ | 953,000 |  |  | $ | 1,197,000 |
U.S. federal net operating loss carryover | 8,258,000 |  |  | 8,846,000 |
U.S. state unitary net operating loss carryovers | 1,117,000 |  |  | 939,000 |
Canadian net operating loss carryovers | 877,000 |  |  | 1,411,000 |
Tax basis of investment in land in excess of book basis under U.S. tax law | 26,000 |  |  | 305,000 |
Property and equipment accumulated book depreciation and depletion in excess of tax under Canadian tax law | — |  |  | 1,091,000 |
Property and equipment accumulated book depreciation and depletion in excess of tax under U.S. tax law | 568,000 |  |  | 699,000 |
Liabilities accrued for books but not for tax under U.S. tax law | 882,000 |  |  | 1,225,000 |
Liabilities accrued for books but not for tax under Canadian tax law | 2,120,000 |  |  | 1,813,000 |
Foreign currency loss under U.S. tax law | 102,000 |  |  | — |
Foreign currency loss under Canadian tax law | 124,000 |  |  | — |
Other | 278,000 |  |  | 442,000 |
Total gross deferred income tax assets | 15,305,000 |  |  | 17,968,000 |
Less valuation allowance | (12,608,000) |  |  | (14,616,000) |
Net deferred income tax assets | 2,697,000 |  |  | 3,352,000 |
Deferred income tax liabilities: |  |  |
Property and equipment accumulated tax depreciation and depletion in excess of book under Canadian tax law | (280,000) |  |  | — |
Book basis of investment in land development partnerships in excess of tax basis under U.S. tax law | (545,000) |  |  | (1,156,000) |
Book basis of investment in land development partnerships in excess of tax basis under U.S. state non-unitary tax law | (166,000) |  |  | (352,000) |
U.S. oil and gas property and equipment accumulated tax depreciation and depletion in excess of book under U.S. tax law | (121,000) |  |  | (142,000) |
U.S. oil and gas property and equipment accumulated tax depreciation and depletion in excess of book under U.S. state tax law | (23,000) |  |  | (7,000) |
U.S. tax law impact of foreign branch deferred tax asset under Canadian tax law | (1,465,000) |  |  | (1,782,000) |
Other | (285,000) |  |  | (272,000) |
Total deferred income tax liabilities | (2,885,000) |  |  | (3,711,000) |
Net deferred income tax liability | $ | (188,000) |  |  | $ | (359,000) |
Reported as: |  |  |
Deferred income tax assets | — |  |  | — |
Deferred income tax liabilities | (188,000) |  |  | (359,000) |
Net deferred income tax liability | $ | (188,000) |  |  | $ | (359,000) |
The total valuation allowance decreased $2,008,000 for the year ended September 30, 2022. The decrease was due to current fiscal year operational activity that resulted in changes in deferred tax asset and liability balances, and there were no changes in judgment about the realizability of related deferred tax assets in future years. Of the total net decrease in the valuation allowance for fiscal 2022, $1,614,000 was recognized as an income tax benefit and $394,000 was credited to accumulated other comprehensive loss. Net deferred tax assets at September 30, 2022 of $2,697,000 consists of the portion of U.S. federal consolidated deferred tax assets that are estimated to be partially realized through corresponding reversals of U.S. federal consolidated deferred tax liabilities related to the Kukio Resort Land Development Partnerships' excess of book income over taxable income, the book basis of property and equipment in excess of tax basis under U.S federal and Canadian tax law, foreign branch deferred taxes and certain other minor deferred tax liabilities. At September 30, 2022, Barnwell had U.S. federal foreign tax credit carryovers, U.S. federal net operating loss carryovers, U.S. state net operating loss carryovers and Canadian net operating loss carryovers totaling $953,000, $39,327,000, $17,452,000 and $3,411,000, respectively. All four items were fully offset by valuation allowances at September 30, 2022, except for a portion of Hawaii NOLs which is expected to shelter a portion of the reversal of the Company’s Hawaii non-unitary taxable temporary difference related to its investment in Hawaii land development partnerships. The U.S. federal net operating loss carryovers generated through September 30, 2018 expire in fiscal years 2032-2038, the U.S. state unitary net operating loss carryovers generated through September 30, 2017 expire in fiscal years 2033-2037, the Canadian net operating loss carryovers expire in fiscal years 2037-2042, and the foreign tax credit carryovers expire in fiscal years 2023-2025. The U.S. federal net operating loss carryovers generated in fiscal years 2019-2021 and the U.S. state net operating loss carryovers generated in fiscal years 2018-2022 have no expiry, however utilization of the U.S. state and U.S. federal net operating loss carryovers generated in these and future years are limited to 80% of taxable income. FASB ASC Topic 740, Income Taxes, prescribes a threshold for recognizing the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Barnwell files U.S. federal income tax returns, income tax returns in various U.S. states, and Canadian federal and provincial tax returns. A number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. We believe that our unrecognized tax benefits are reflected on a more likely than not basis. We evaluate uncertain tax positions based on ongoing facts and circumstances. Any change in judgment related to the expected resolution of uncertain tax positions is recognized in earnings in the period in which such change occurs. Interest and penalties, if any, related to unrecognized tax benefits are recorded as a component of income tax expense. Settlement of any particular position could require the use of cash. Favorable resolution for an amount less than the amount estimated by Barnwell would be recognized as a decrease in the effective income tax rate in the period of resolution, and unfavorable resolution in excess of the amount estimated by Barnwell would be recognized as an increase in the effective income tax rate in the period of resolution. Below are the changes in unrecognized tax benefits.
| Year ended September 30,
| 2022 |  | 2021
Balance at beginning of year | $ | — |  |  | $ | — |
Effect of tax positions taken in prior years | 60,000 |  |  | — |
Accrued interest related to tax positions taken | 2,000 |  |  | — |
Balance at end of year | $ | 62,000 |  |  | $ | — |
Uncertain tax positions at September 30, 2022 are related to the potential assessment of penalties and interest for the failure to file certain foreign information forms with each of our U.S. federal income tax returns for fiscal years 2019, 2020 and 2021. The Company is in the process of amending its U.S. federal tax returns to include missing forms and plans to request abatement of the potential penalties and interest. Included below is a summary of the tax years, by jurisdiction, that remain subject to examination by taxing authorities at September 30, 2022:
Jurisdiction | Fiscal Years Open
U.S. federal | 2019 – 2021
Various U.S. states | 2019 – 2021
Canada federal | 2015 – 2021
Various Canadian provinces | 2015 – 2021

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration