A-Mark Precious Metals, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes

6 Months Ended

Dec. 31, 2016

INCOME TAXES

The Company files a consolidated federal income tax return based on a June 30^th tax year end. The provision for income taxes for the three and six months ended December 31, 2016 and 2015 consists of the following:



in thousands
	Three Months Ended				Six Months Ended
	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Provision for income taxes	$	1,590	$	863	$	2,649	$	4,332

The effective tax rate for the three and six months ended December 31, 2016 and 2015 is as follows:



in thousands
	Three Months Ended				Six Months Ended
	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Effective tax rate	36.7	%	38.3	%	36.1	%	38.2	%

Transition of Tax Filing Obligation Due to the Spinoff

The Company files income tax returns in the U.S., various states and Austria. Prior to the Distribution, the Company was included in the consolidated federal and state tax filings of the Former Parent. In connection with the spinoff, the Company entered into a tax separation agreement with the Former Parent (the "Tax Separation Agreement"). The Tax Separation Agreement governs the respective rights, responsibilities and obligations of the Former Parent and the Company with respect to, among other things, liabilities for U.S. federal, state, local and other taxes. In addition to the allocation of tax liabilities, the Tax Separation Agreement addresses the preparation and filing of tax returns for such taxes and disputes with taxing authorities regarding such taxes. Pursuant to the Tax Separation Agreement, A-Mark may be responsible for any tax amount related to A-Mark that is incurred as the result of adjustments made during the Internal Revenue Service examination or other tax jurisdictions' examinations of the Former Parent. Under the terms of the Tax Separation Agreement, the Former Parent has the responsibility to prepare and file tax returns for tax periods ending prior to the Distribution date and for tax periods which include the Distribution date but end after the Distribution date, which includes A-Mark and its subsidiaries.

The Company's condensed consolidated financial statements recognized the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods, as if the Company were a separate taxpayer during the period prior to the Distribution rather than a member of the Former Parent's consolidated income tax return group. Current income tax receivable due from the Former Parent reflects balances due to A-Mark for its share of the income tax assets of the group.

As of December 31, 2016 and June 30, 2016, the amount receivable under the Company's income tax sharing obligation due from Former Parent totaled $0.0 million, and $0.2 million, respectively, and is shown on the face of the condensed consolidated balance sheets as income taxes receivable from Former Parent.

Tax Balances and Activity

The tax returns filed by the Company since the spinoff have been prepared on a basis consistent with past practices. As of December 31, 2016 and June 30, 2016, the income tax receivable totaled $1.4 million and $7.3 million, respectively. As of December 31, 2016 and June 30, 2016, the income tax payable total of $5.7 million and $0.0 million, respectively; the change was primarily due to the movement of the Company's taxable temporary differences.

As of December 31, 2016 and June 30, 2016, the deferred tax assets (non-current) totaled $0.5 million and $0.4 million, respectively, and the deferred tax liabilities (non-current) totaled $3.9 million and $7.2 million, respectively.

Net Operating Loss Carryforwards and Valuation Allowances

As of December 31, 2016 and June 30, 2016, the Company's state net operating loss carryforwards totaled approximately $13.5 million and $16.6 million, respectively. The Company's tax-effected state and city net operating loss carryforwards totaled, as of December 31, 2016 and June 30, 2016, $1.2 million and $0.9 million, respectively. These net operating loss carryforwards start to expire in the year ending June 30, 2030. As of December 31, 2016 and June 30, 2016, the Company had $44,000 and $44,000, respectively, of valuation allowance for certain state and city net operating loss carryforwards, based on the Company's annual assessment of the realizability of its deferred tax assets.

Unrecognized Tax Benefits

For six months ended December 31, 2016 there was no material movement in the Company’s unrecognized tax benefits, including interest and penalties. Additionally, the Company does not expect a material change to its unrecognized tax benefits in the next 12 months.

Tax Examinations

On August 22, 2016, the Internal Revenue Service notified the Company that it has commenced an examination of the Company's tax return for the year ended June 30, 2015. The Company is unable to determine the outcome of the exam at this time.